Blossom Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $41,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Blossom's incremental borrowing rate is 6%. Blossom is unaware of the rate being used by the lessor. At the end of the lease, Blossom has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blossom uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Prepare the journal entries, that Blossom should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 125124 and the final answers to O decimal places, e.g. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2025 Right-of-Use Asset Lease Liability December 31,2025 (To record leased asset and related liability.) Prepaid Lease Executory Costs Cash (To record the first rental payment.) eTextbook and Media List of Accounts Debit 26607 40000 Credit Prepare the journal entries, that Blossom should record on December 31, 2026. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2026 December 31,2026 Interest Expense Lease Liability (To record amortization.) Interest Expense Lease Liability Cash (To record annual payment on lease liability.) eTextbook and Media List of Accounts Debit 19955 Credit 266C 4000 Prepare the journal entries, that Blossom should record on December 31, 2027. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places eg. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2027 Interest Expense December 31,2027 Lease Liability (To record annual amortization on leased assets.) Interest Expense Lease Liability Cash (To record annual payment on lease liability.) eTextbook and Media List of Accounts Debit Credit What amounts would appear on Blossom's December 31, 2027, balance sheet relative to the lease arrangement? (Round answers to O decimal places, eg. 58,971) Current Liabilities Lease Liability BLOSSOM STEEL COMPANY Balance Sheet (Partial) December 31, 2027 Assets Liabilities

Blossom Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $41,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Blossom's incremental borrowing rate is 6%. Blossom is unaware of the rate being used by the lessor. At the end of the lease, Blossom has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blossom uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Prepare the journal entries, that Blossom should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 125124 and the final answers to O decimal places, e.g. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2025 Right-of-Use Asset Lease Liability December 31,2025 (To record leased asset and related liability.) Prepaid Lease Executory Costs Cash (To record the first rental payment.) eTextbook and Media List of Accounts Debit 26607 40000 Credit Prepare the journal entries, that Blossom should record on December 31, 2026. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2026 December 31,2026 Interest Expense Lease Liability (To record amortization.) Interest Expense Lease Liability Cash (To record annual payment on lease liability.) eTextbook and Media List of Accounts Debit 19955 Credit 266C 4000 Prepare the journal entries, that Blossom should record on December 31, 2027. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places eg. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2027 Interest Expense December 31,2027 Lease Liability (To record annual amortization on leased assets.) Interest Expense Lease Liability Cash (To record annual payment on lease liability.) eTextbook and Media List of Accounts Debit Credit What amounts would appear on Blossom's December 31, 2027, balance sheet relative to the lease arrangement? (Round answers to O decimal places, eg. 58,971) Current Liabilities Lease Liability BLOSSOM STEEL COMPANY Balance Sheet (Partial) December 31, 2027 Assets Liabilities

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 12P: Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease...

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