On January 1, 2021 dean company signs a 10 year noncancelable lease agreement to lease a building from

Mitchell storage company. Below are the facts of the lease agreement

1) the agreement requires equal rent payments of $43,000 beginning on Jan 1, 2021

2) the fair and present value of the building is $350,000 on Jan 1, 2021

3) the building has an estimated economic life of 12 years with unguaranteed residual value of $20,000. Dean

Depreciates using the straight-line method.

4) the lease is nonrenewable and at the end the building is owned by the lessor.

5) dean's incremental borrowing rate is 11 percent per year. Mitch storage rate is unknown.

6) the yearly rental payment includes a $1,300 executory cost.

Prepare the journal entries on deans books to reflect the signing of the lease agreement and to record the payments

And expenses related to this lease years 2021, 2022 and the entry on Jan 1, 2023. Dean's year end is December 31st.

Answer rating: 100% (QA)

Present Fair Value of AnnuityLease Payments27259488 Journal EntriesJE in the books of Mike On Januar... View the full answer