A company signs a lease on January 1, Year One, to lease a machine for eight...

Transcribed Image Text:

A company signs a lease on January 1, Year One, to lease a machine for eight years. Payments are $10,000 per year with the first payment made at the beginning of the year. The company has an incremental borrowing rate of 10 percent and the lease is considered as a capital lease. Assume the present value of an annuity due of $1 for eight periods at an annual interest rate of 10 percent is 5.335. Ensure to show work for all calculations. Prepare the following journal entries for the company. • Record the signing of the lease on January 1, Year One. • Record the first payment on January 1, Year One. • Record depreciation on the equipment on December 31, Year One. . Record interest on the liability on December 31, Year One. • Record the second payment on January 1, Year Two. A company signs a lease on January 1, Year One, to lease a machine for eight years. Payments are $10,000 per year with the first payment made at the beginning of the year. The company has an incremental borrowing rate of 10 percent and the lease is considered as a capital lease. Assume the present value of an annuity due of $1 for eight periods at an annual interest rate of 10 percent is 5.335. Ensure to show work for all calculations. Prepare the following journal entries for the company. • Record the signing of the lease on January 1, Year One. • Record the first payment on January 1, Year One. • Record depreciation on the equipment on December 31, Year One. . Record interest on the liability on December 31, Year One. • Record the second payment on January 1, Year Two.

Answer rating: 100% (QA)

Lets go through each journal entry step by step 1 Record the signing of the lease on January 1 Year One The company is leasing a machine for eight yea... View the full answer