Watt Financing leased a packing machine to Nuts Company. The noncancelable lease requires lease payments of $50,000
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Question:
Watt Financing leased a packing machine to Nuts Company. The noncancelable lease requires lease payments of $50,000 per year, payable in advance, over a five-year period. Watt’s implicit interest rate (known to Nuts) is 11 percent. The lease term begins on January 1, 2019. The machine’s economic life is 10 years with a cost of $200,000 and fair value of $235,000. The collectability of the lease payments is probable for the lessor.
Instructions
Assuming that there is a bargain purchase option of $20,000 for Nuts, provide the journal entries required on both Watt's and Nuts' books through December 31, 2020.
Related Book For
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
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