Wildhorse Corp. agreed to lease property from Sheffield Corp. effective January 1, 2020, for an annual payment
Question:
Wildhorse Corp. agreed to lease property from Sheffield Corp. effective January 1, 2020, for an annual payment of $24,201, beginning January 1, 2020. The property is made up of land with a fair value of $114,000 and a two-storey office building with a fair value of $176,000 and a useful life of 25 years with no residual value. The implicit interest rate is 7.5%, the lease term is 25 years, and title to the property will not be transferred to Wildhorse by the end of the lease term. Assume that there is also no bargain purchase option, but that the lease does meet other criteria to qualify as a capital lease. Both Wildhorse and Sheffield use ASPE.
Prepare the required entries made by Wildhorse Corp. on January 1, 2020, and at its year end of December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
Date | Account Titles and Explanation | Debit | Credit |
---|---|---|---|
choose a transaction date Jan. 1Dec. 31 | enter an account title to record inception of lease | enter a debit amount | enter a credit amount |
enter an account title to record inception of lease | enter a debit amount | enter a credit amount | |
(To record inception of lease.) | |||
Jan. 1 | enter an account title to record first lease payment on January 1 | enter a debit amount | enter a credit amount |
enter an account title to record first lease payment on January 1 | enter a debit amount | enter a credit amount | |
enter an account title to record first lease payment on January 1 | enter a debit amount | enter a credit amount | |
(To record first lease payment.) | |||
choose a transaction date Jan. 1Dec. 31 | enter an account title to record interest | enter a debit amount | enter a credit amount |
enter an account title to record interest | enter a debit amount | enter a credit amount | |
(To record interest.) | |||
choose a transaction date Jan. 1Dec. 31 | enter an account title to record depreciation expense | enter a debit amount | enter a credit amount |
enter an account title to record depreciation expense | enter a debit amount | enter a credit amount | |
(To record depreciation expense.) |
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy