The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a
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The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.
Commencement date | May 1, 2020 | ||
Annual lease payment due at the beginning of | |||
each year, beginning with May 1, 2020 | $20,471.94 | ||
Bargain purchase option price at end of lease term | $4,000 | ||
Lease term | 5 | years | |
Economic life of leased equipment | 10 | years | |
Lessor’s cost | $65,000 | ||
Fair value of asset at May 1, 2020 | $91,000 | ||
Lessor’s implicit rate | 8 | % | |
Lessee’s incremental borrowing rate | 8 | % |
The collectibility of the lease payments by Mooney is probable.
Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2020 and 2021. The lessor’s accounting period ends on December 31. Reversing entries are not used by Mooney.
- (To record the lease) (4 entries)
- (To record lease payment) (2 entries)
- (2 entries)
- (3 entries)
- (2 entries)
Suppose the collectability of the lease payments was not probable for Mooney. Prepare all necessary journal entries for the company in 2020.
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