On January 1, 2022, Kevin's Appliance Company leased delivery trucks from Captain Leasing. The lease agreement...

 

Transcribed Image Text:

On January 1, 2022, Kevin's Appliance Company leased delivery trucks from Captain Leasing. The lease agreement calls for Kevin's Appliance to make semiannual lease payments of $14,281.53 over a four-year lease term, payable June 30 and December 31, with the first lease payment due on January 1, 2022. Kevin's Appliance incremental borrowing rate is 8%, the same rate Captain Leasing uses to calculate the lease payment amounts. The lease does not provide for any ownership transfer or option to purchase the delivery trucks. Amortization is recorded on a straight-line basis at the end of each fiscal year, which is December 31st. The fair value of the delivery trucks is $100,000 at January 1, 2022. Requirement 1: 1-1 Determine and provide documentation to identify this lease as either a Financing lease or an Operating lease for the leasee's accounting (Kevin's Appliance). Determine the present value of the lease payments (to the nearest dollar). Prepare the Amortization Schedule for the Leasee. Prepare the January 1, 2022, June 30, 2022, and the December 31, 2022 journal entries required for this lease, including amortization. 1-2 1-3 1-4 On January 1, 2022, Kevin's Appliance Company leased delivery trucks from Captain Leasing. The lease agreement calls for Kevin's Appliance to make semiannual lease payments of $14,281.53 over a four-year lease term, payable June 30 and December 31, with the first lease payment due on January 1, 2022. Kevin's Appliance incremental borrowing rate is 8%, the same rate Captain Leasing uses to calculate the lease payment amounts. The lease does not provide for any ownership transfer or option to purchase the delivery trucks. Amortization is recorded on a straight-line basis at the end of each fiscal year, which is December 31st. The fair value of the delivery trucks is $100,000 at January 1, 2022. Requirement 1: 1-1 Determine and provide documentation to identify this lease as either a Financing lease or an Operating lease for the leasee's accounting (Kevin's Appliance). Determine the present value of the lease payments (to the nearest dollar). Prepare the Amortization Schedule for the Leasee. Prepare the January 1, 2022, June 30, 2022, and the December 31, 2022 journal entries required for this lease, including amortization. 1-2 1-3 1-4

Answer rating: 100% (QA)

STEP... View the full answer