1. The agreement requires equal rental payments of $81,230 beginning on January 1, 2023. 2. The lathe's fair value on January 1, 2023, is $550,000. 3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $14,000. Blossom depreciates similar equipment using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. 5. Blossom's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Blossom. 6. The yearly rental payment includes $2,605.18 of executory costs related to insurance on the lathe. Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF 1. Assume that Blossom's fiscal year end is May 31. Prepare the journal entries on Blossom's books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2023 and 2024. Blossom does not prepare reversing entries. (List all debit entries before credit entries. 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 O for the amounts. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.)
1. The agreement requires equal rental payments of $81,230 beginning on January 1, 2023. 2. The lathe's fair value on January 1, 2023, is $550,000. 3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $14,000. Blossom depreciates similar equipment using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. 5. Blossom's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Blossom. 6. The yearly rental payment includes $2,605.18 of executory costs related to insurance on the lathe. Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF 1. Assume that Blossom's fiscal year end is May 31. Prepare the journal entries on Blossom's books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2023 and 2024. Blossom does not prepare reversing entries. (List all debit entries before credit entries. 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 O for the amounts. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.)
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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Transcribed Image Text:On January 1, 2023, Blossom Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from
Liu Inc. The following information concerns the lease agreement.
1.
The agreement requires equal rental payments of $81,230 beginning on January 1, 2023.
2.
3.
The lathe's fair value on January 1, 2023, is $550,000.
The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $14,000. Blossom depreciates
similar equipment using the straight-line method.
4.
The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.
5.
Blossom's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Blossom.
6.
The yearly rental payment includes $2,605.18 of executory costs related to insurance on the lathe.
Assume this is a manufacturer/dealer lease.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF 1.
Assume that Blossom's fiscal year end is May 31. Prepare the journal entries on Blossom's books to reflect the signing of the lease
agreement and to record payments and expenses related to this lease for the calendar years 2023 and 2024. Blossom does not
prepare reversing entries. (List all debit entries before credit entries. 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 O for the amounts. Record journal
entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g.
52.75.)
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