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Culver Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000. The terms of the lease are as follows: The lease term begins on January 1, 2019, and runs for 5 years. The lease requires payments of $37,396 at the beginning of each year starting January 1, 2019. • At the end of the lease term, the equipment is to be returned to the lessor. Lantus implied interest rate is 5%, while Culver s borrowing rate is 6%. Culver uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare the 2019 journal entries for Culver Limited. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select No Entry for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Date 2019 Jan. 1 Jan. 1 Dec. 31 Dec. 31 (To record inception of lease.) Cash (To record lease payment.) Interest Expense (To record interest.) (To record depreciation expense.) 170000 Credit 170000 ILL Culver Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000. The terms of the lease are as follows: The lease term begins on January 1, 2019, and runs for 5 years. The lease requires payments of $37,396 at the beginning of each year starting January 1, 2019. • At the end of the lease term, the equipment is to be returned to the lessor. Lantus implied interest rate is 5%, while Culver s borrowing rate is 6%. Culver uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare the 2019 journal entries for Culver Limited. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select No Entry for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Date 2019 Jan. 1 Jan. 1 Dec. 31 Dec. 31 (To record inception of lease.) Cash (To record lease payment.) Interest Expense (To record interest.) (To record depreciation expense.) 170000 Credit 170000 ILL

Answer rating: 100% (QA)

Present value of the minimum lease payments 37396 x 1 1 105 5 005 105 1700... View the full answer