Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Larkspur Company....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Larkspur Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $63,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $20,289 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Larkspur uses the straight-line depreciation method for all equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.) Annual Lease Payment $ $ LARKSPUR COMPANY (Lessee) Lease Amortization Schedule Interest on Liability $ $ 609 Reduction of Lease Liability $ Lease Liability Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation (To record the lease) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) (To reverse interest expense) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) Debit Credit Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Larkspur Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $63,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $20,289 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Larkspur uses the straight-line depreciation method for all equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.) Annual Lease Payment $ $ LARKSPUR COMPANY (Lessee) Lease Amortization Schedule Interest on Liability $ $ 609 Reduction of Lease Liability $ Lease Liability Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation (To record the lease) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) (To reverse interest expense) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) Debit Credit
Expert Answer:
Answer rating: 100% (QA)
Solution Present value of minimum lease payment 19211 Cumulative PV facto... View the full answer
Related Book For
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
Posted Date:
Students also viewed these accounting questions
-
Laura Leasing Company signs an agreement on January 1, 2008, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 5...
-
Laura Leasing SA signs an agreement on January 1, 2019, to lease equipment to Plote AG. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no...
-
Determine the beam column shown below is capable of safely carrying the applied loads. Given loads were determined by using LRFD provisions and bending moment diagrams are obtained from second order...
-
Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company...
-
Three single-phase, two-winding transformers, each rated 450 MVA, \(20 \mathrm{kV} / 288.7 \mathrm{kV}\), with leakage reactance \(\mathrm{X}_{\mathrm{eq}}=0.10\) per unit, are connected to form a...
-
What specific methods did Europeans use to control and extract wealth from their colonies?
-
Analyzing Gross Profit Percentage on the Basis of an Income Statement The following summarized data were provided by the records of Slate, Incorporated, for the year ended December 31, 2012:...
-
A local Dunkin Donuts franchise must buy a new piece ofequipment in 5 years that will cost $88,000. The company is settingup a sinking fund to finance the purchase. What will the quarterlydeposit be...
-
BHELL has to decide whether or not to drill for oil in a new offshore site located in South China Sea, close to the Sarawak border. Previous effort made by BHELL in a nearby area shows that only 40%...
-
A code-oriented system implemented through a strong central government, the uniform and conservative nature of the Japanese accounting system, and the presence of Keiretsu groupings are still...
-
Explain four ways that persuasion has changed in the digital age.
-
What are some strategies to effectively manage adverse news on social networking sites and blogs?
-
For what reasons should a job refusal letter be intentionally vague?
-
Go to the Internet and search using the phrase cost analysis tools. What are some of the links and examples of cost analysis as it applies to projects?
-
Revise the following sentences to reduce gender, racial, ethnic, age, and disability bias. a. The conference will offer special excursions for the wives of executives. b. Does each salesman have his...
-
1) Should the government build more shelters for the homeless? If so, where will it get the resources? If no, what are the consequences?
-
a. Show that the expansion of q(x) in ascending powers of x can be approximated to 10 2x + Bx 2 + Cx 3 where B and C are constants to be found. b. Find the percentage error made in using the series...
-
Morgan Marie Leasing Company signs an agreement on January 1, 2008, to lease equipment to Cole William Company. The following information relates to this agreement. 1. The term of the non-cancelable...
-
Assume that Best Buy made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for $4,200 for one of its departments. On January 2, Best Buy paid...
-
John Lee Hooker Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Hooker to advise it in the preparation of a statement of...
-
Random samples are taken from two normal populations with \(\sigma_{1}=9.6\) and \(\sigma_{2}=13.2\) to test the null hypothesis \(\mu_{1}-\mu_{2}=41.2\) against the alternative hypothesis...
-
With reference to part (a) of Exercise 8.33, how would you pair and then randomize for a paired test? Data From Exercise 8.33 8.33 How would you randomize, for a two sample test, in each of the...
-
How would you randomize, for a two sample test, in each of the following cases? (a) Forty combustion engines are available for a speed test and you want to compare a modified exhaust valve with the...
Study smarter with the SolutionInn App