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$5$G

Chapter $20$ handout.docx

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On January $1,2025,$ Burke Corporation signed a $4-$year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $$7,000$ on January $1$ each year beginning on $\frac{1}{1}\frac{?}{25}.$ The machine has an estimated useful life of $6$ years and a $$3,000$ bargain purchase option.

The lessor's implicit rate is $10\%,$ and Burke knows this rate. The equipment has a fair value of $$30,000$ and a cost of $$21,000.$ Both companies have a $\frac{12}{31}$ year$-$end.

A$.$ Complete all of the following for the Lessee.

What type of lease is this? Show the $5$ criteria and answer for each.

Prepare amortization table.

Prepare all necessary journal entries for $2025-2026$

Prepare the $\frac{12}{31}\frac{?}{26}$ balance sheet and income statement

Prepare the lease end entry related to the bargain purchase option.

B$.$ Using the same information, except the $$3,000$ is an unguaranteed residual value. This will make it an operating lease. Record the following entries for the lessee.

a$.$ What type of lease is this? Show the $5$ criteria and answer for each.

b$.$ Prepare amortization tables. There will be $2$ and the first one will be different than part A$.$

c$.$ Prepare all necessary journal entries for $2025-2026$

d$.$ Prepare the $\frac{12}{31}\frac{?}{26}$ balance sheet and income statement

C$.$ Complete the table below related to this lease.

$\backslash$table$[[$If the $3,000$ is:$,$What's included in the $90\%$ Test,What's included in the Lease Liab.,Is there a row at the bottom of the amortization table.,JE at the end of the lease,Years to Depr the ROU Asset over.$],[$URV of $3,000,,,,,],[$GRV $3,000,$ ERV $8,000,,,,,],[$GRV $3,000,$ ERV $1,000,,,,,],[$BPO $3,000,,,,,]]$