2. On August 31, 2018, Simmons Inc. leased warehouse equipment from Covington Corp. Thelease agreement calls for Simmons to make semiannual lease payments of $50,000 over a 7-yearlease term, payable at August 31 and February 28, with the first payment on August 31, 2018.Simmons' incremental borrowing rate is 11%, the same rate Covington used to calculate leasepayment amounts. Covington purchased the warehouse equipment at a cost of $700,000 onAugust 31, 2018 with an expected useful life of 10 years and no salvage value. The fiscal yearfor both Simmons and Covington ends on December 31.Required:a. What are the present value of the lease payments on August 31, 2018?b. Starting on August 31, 2018 prepare all journal entries related to the lease that Simmons wouldhave to make through December 31, 2020.c. Starting on August 31, 2018 prepare all journal entries related to the lease that Covington wouldhave to make through December 31, 2020.d.What amounts related to the lease would Simmons report on its balance sheet on December 31,2018, December 31, 2019, and December 31, 2020?e. What amounts related to the lease would Simmons report on its income statement for the yearsending December 31, 2018, December 31, 2019, and December 31, 2020?f.What amounts related to the lease would Covington report on its balance sheet on December 31,2018, December 31, 2019, and December 31, 2020?g. What amounts related to the lease would Covington report on its income statement for the yearsending December 31, 2018, December 31, 2019, and December 31, 2020?

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On August 31, 2018, Simmons Inc. leased warehouse equipmer lease agreement calls for Simmons to make semiannual lease pa lease term, payable at August 31 and February 28, with the first. Simmons' incremental borrowing rate is 11%, the same rate Co payment amounts. Covington purchased the warehouse equipm August 31, 2018 with an expected useful life of 10 years and no for both Simmons and Covington ends on December 31. Required: What are the present value of the lease payments on August 31,

On August 31, 2018, Simmons Inc. leased warehouse equipmer lease agreement calls for Simmons to make semiannual lease pa lease term, payable at August 31 and February 28, with the first. Simmons' incremental borrowing rate is 11%, the same rate Co payment amounts. Covington purchased the warehouse equipm August 31, 2018 with an expected useful life of 10 years and no for both Simmons and Covington ends on December 31. Required: What are the present value of the lease payments on August 31,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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