On January 1, 20X1, Franklin Industries leased equipment on a four-year term at $150,000 annual rental...
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On January 1, 20X1, Franklin Industries leased equipment on a four-year term at $150,000 annual rental payments to be paid in advance to Arden Ltd. There is a bargain purchase option on December 31, 20X4 (after four years), of $6,000. The implicit interest rate of the lease is 8% and the lessee's incremental borrowing rate is 7%. Franklin Industries knows both rates. The first lease payment is made on January 1, 20X1, and subsequent payments are made on January 1 of the year. Assume that the economic life of the equipment is estimated to be five years. Both the lessee and the lessor are on a calendar-year basis and both companies use straight-line depreciation for all long-term assets. Required: (a) Prepare all journal entries for the year of 20X1 for Franklin Industries (lessee). (b) What should be the total amount of lease-related expenses the lessee report in year 20X1 for Franklin Industries. Show the items and the amount for each item. (c) Determine the total amount of leases-related income Arden Inc. (the lessor) will report for the year 20X1. (d) If the equipment is not purchased by Franklin Industries and the lease is permitted to lapse on December 31, 20X4, prepare the journal entries to record such a transaction. On January 1, 20X1, Franklin Industries leased equipment on a four-year term at $150,000 annual rental payments to be paid in advance to Arden Ltd. There is a bargain purchase option on December 31, 20X4 (after four years), of $6,000. The implicit interest rate of the lease is 8% and the lessee's incremental borrowing rate is 7%. Franklin Industries knows both rates. The first lease payment is made on January 1, 20X1, and subsequent payments are made on January 1 of the year. Assume that the economic life of the equipment is estimated to be five years. Both the lessee and the lessor are on a calendar-year basis and both companies use straight-line depreciation for all long-term assets. Required: (a) Prepare all journal entries for the year of 20X1 for Franklin Industries (lessee). (b) What should be the total amount of lease-related expenses the lessee report in year 20X1 for Franklin Industries. Show the items and the amount for each item. (c) Determine the total amount of leases-related income Arden Inc. (the lessor) will report for the year 20X1. (d) If the equipment is not purchased by Franklin Industries and the lease is permitted to lapse on December 31, 20X4, prepare the journal entries to record such a transaction.
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a Prepare all journal entries for the year of 20 X 1 for Franklin Industries les see ANS WER Deb it ... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
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