Sage Hill, Inc. leases a piece of equipment to Bucks Company on January 1, 2020. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,523 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $47,000, a book value of $42,000 and a useful life of 8 years. At the end of the lease term, Sage Hill expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Sage Hill wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.) Click here to view factor tables. Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount
Sage Hill, Inc. leases a piece of equipment to Bucks Company on January 1, 2020. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,523 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $47,000, a book value of $42,000 and a useful life of 8 years. At the end of the lease term, Sage Hill expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Sage Hill wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.) Click here to view factor tables. Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sage Hill, Inc. leases a piece of equipment to Bucks Company on January 1, 2020. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,523 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $47,000, a book value of $42,000 and a useful life of 8 years. At the end of the lease term, Sage Hill expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party.
Assuming Sage Hill wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record itsjournal entry at the commencement of the lease on January 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)
Click here to view factor tables.
Assuming Sage Hill wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its
Click here to view factor tables.
Account Titles and Explanation
|
Debit
|
Credit
|
---|---|---|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
Expert Solution
Step 1
Lease: When one party lets out its assets to another party for some time or specific time mentioned in the contract is known as leasing the assets.
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