Gemelli Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment....

  

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Gemelli Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments of $1,400 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $4,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $500. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. Gemelli's incremental borrowing rate is 10% and the lessor's implicit rate is not known. Instructions: 1. Indicate the type of lease Gemelli has entered into and why (include a list of the Capital Lease Criteria) Instructions: 1. Indicate the type of lease Gemelli has entered into and why (include a list of the Capital Lease Criteria) 2. Prepare the journal entries on Gemelli's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 C. January 1, 2021 Gemelli Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments of $1,400 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $4,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $500. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. Gemelli's incremental borrowing rate is 10% and the lessor's implicit rate is not known. Instructions: 1. Indicate the type of lease Gemelli has entered into and why (include a list of the Capital Lease Criteria) Instructions: 1. Indicate the type of lease Gemelli has entered into and why (include a list of the Capital Lease Criteria) 2. Prepare the journal entries on Gemelli's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 C. January 1, 2021

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Lease refers to the contract between parties where one party agrees to use asset of other and pay lease rentals in exchange to that party Here the lessor asset owner lends his asset to lessee user of ... View the full answer