"Blossom Corporation entered into a lease agreement on January 1, 2025, to provide Cullumber Company with a piece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $15,322 to be made at the beginning of each year. 2. The machinery has a fair value of $62,000, a book value of $40,000, and an economic life of 8 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed. 4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The implicit rate is 4 %, which is known by Cullumber. 6. Collectibility of the payments is probable." Prepare the 2025 journal entries for Cullumber Prepare the 2025 Journal entries for Blossom Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Cullumber would need, assuming it elects to use the short-term lease option. ?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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"Blossom Corporation entered into a lease agreement on January 1, 2025, to provide Cullumber Company with a piece of machinery. The terms of the lease agreement
were as follows.
1. The lease is to be for 3 years with rental payments of $15,322 to be made at the beginning of each year.
2. The machinery has a fair value of $62,000, a book value of $40,000, and an economic life of 8 years.
3. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed.
4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.
5. The implicit rate is 4 %, which is known by Cullumber.
6. Collectibility of the payments is probable."
Prepare the 2025 journal entries for Cullumber
Prepare the 2025 Journal entries for Blossom
Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Cullumber would
need, assuming it elects to use the short-term lease option.
?
Transcribed Image Text:"Blossom Corporation entered into a lease agreement on January 1, 2025, to provide Cullumber Company with a piece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $15,322 to be made at the beginning of each year. 2. The machinery has a fair value of $62,000, a book value of $40,000, and an economic life of 8 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed. 4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The implicit rate is 4 %, which is known by Cullumber. 6. Collectibility of the payments is probable." Prepare the 2025 journal entries for Cullumber Prepare the 2025 Journal entries for Blossom Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Cullumber would need, assuming it elects to use the short-term lease option. ?
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