Assume the following: 1. A 3-year lease in initiated on January 1, X1 for equipment having an
Question:
Assume the following:
1. A 3-year lease in initiated on January 1, X1 for equipment having an expected economic life of 5 year and a fair value of $144,288.
2. Three annual lease payments $52,000 are required beginning January 1, X1. Two thousand dollars of the lease payments are to cover various expenditures of the lessor related to property taxes and insurance. 3
. The lease agreement includes a bargain purchase option whereby the lessee can purchase the equipment for $10,000 on December 31, X3. The lessee expects the equipment to have a residual value of $1,000 by December 31, X5.
4. The lessee's incremental borrowing rate is 10% which reflects the lessor's implicit rate of return on the lease.
Prepare journal entries for both lessor and lessee for all three years.
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield