Part A Eubank Company, as the lessee, enters into a lease agreement for equipment on 1...

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Part A Eubank Company, as the lessee, enters into a lease agreement for equipment on 1 January 2021. The following data are relevant to the lease agreement: 1. The term of the non-cancellable lease is 4 years. Lease payments of $770,000 are due on I January of each year, beginning 1 January 2021. 2. The ungranted residual value at the end of the lease is $50,000. 3. The equipment has an economic life of 6 years. 4. Eubank depreciates similar equipment on a straight-line basis. 5. Eubank's incremental borrowing rate is 10% per year. 6. Eubank is aware that the lessor requires an implicit rate of 8%. Required: (Support with detailed calculations.) AI. Prepare journal entries for Eubank Company on 1 January 2021. 42. Explain the interest expense, if any, for Eubank Company during 2021. Part B Halos Co. is a manufacturer of truck trailers. On 1 January 2021, Halos Co. leased trailers to Leslie Company under a six-year noncancelable lease agreement. The following information is relevant to the lease agreement: 1. An annual payment of $132,193, starting 1 January 2021. provides Halos Co. with an 8% return on investment. 2. Titles of the trailers do not pass to Leslie Company at the end of the lease. 3. The trailers have an expected useful life of 7 years. 4. The fair value of the trailers was $660,000 on 1 January 2021. 5. The cost of the trailers to Halos Co. is $540,000. Required: B. Discuss how Halos Co. should classify the lease. Part A Eubank Company, as the lessee, enters into a lease agreement for equipment on 1 January 2021. The following data are relevant to the lease agreement: 1. The term of the non-cancellable lease is 4 years. Lease payments of $770,000 are due on I January of each year, beginning 1 January 2021. 2. The ungranted residual value at the end of the lease is $50,000. 3. The equipment has an economic life of 6 years. 4. Eubank depreciates similar equipment on a straight-line basis. 5. Eubank's incremental borrowing rate is 10% per year. 6. Eubank is aware that the lessor requires an implicit rate of 8%. Required: (Support with detailed calculations.) AI. Prepare journal entries for Eubank Company on 1 January 2021. 42. Explain the interest expense, if any, for Eubank Company during 2021. Part B Halos Co. is a manufacturer of truck trailers. On 1 January 2021, Halos Co. leased trailers to Leslie Company under a six-year noncancelable lease agreement. The following information is relevant to the lease agreement: 1. An annual payment of $132,193, starting 1 January 2021. provides Halos Co. with an 8% return on investment. 2. Titles of the trailers do not pass to Leslie Company at the end of the lease. 3. The trailers have an expected useful life of 7 years. 4. The fair value of the trailers was $660,000 on 1 January 2021. 5. The cost of the trailers to Halos Co. is $540,000. Required: B. Discuss how Halos Co. should classify the lease.

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Part A Answer Calculation of minimum lease liability Lease Amortization table PV of annual lease pay... View the full answer