Using the data in P12-6, prepare the journal entries required by Coleman Inc. on January 1, 2017, assuming that (a) Task does not guarantee the residual value and (b) Task does guarantee it. Coleman paid $500,000 to acquire the office equipment several weeks prior to the leasing transaction.
In P12-6
On January 1, 2017, Task Co. signs an agreement to lease office equipment from Coleman Inc. for three years with payments of $193,357 beginning December 31, 2017. The equipment's fair value is $500,000 with an expected useful life of four years. At the end of three years, the equipment is expected to have a $50,000 residual value, which Task does not guarantee. Both Task and Coleman use a 12% rate of return in evaluating this transaction.