Cullumber Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement. The lease term is 6 years, with equal annual rental payments of $3,938 at the beginning 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. 1. 2. 3. 4. 5. The building has a fair value of $22,700, a book value to Cullumber of $15,700, and a useful life of 7 years. At the end of the lease term, Cullumber and Walsh expect there to be an unguaranteed residual value of $3,925. Cullumber wants to earn a return of 7% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.

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Chapter1: Financial Statements And Business Decisions
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Using the original facts of the lease, show the journal entries to be made by both Cullumber and Walsh in 2020. (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. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Cullumber Journal Entries
Date
Date
Account Titles and Explanation
+
(To record the lease)
MAMMLITOLMUILLIER
(To record lease payment)
Account Titles and Explanation
(To record the lease)
(To record lease payment)
(To record interest expense)
(To record amortization of the right-of-use asset)
Debit
Debit
Credit
1
Credit
Transcribed Image Text:Using the original facts of the lease, show the journal entries to be made by both Cullumber and Walsh in 2020. (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. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Cullumber Journal Entries Date Date Account Titles and Explanation + (To record the lease) MAMMLITOLMUILLIER (To record lease payment) Account Titles and Explanation (To record the lease) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) Debit Debit Credit 1 Credit
Cullumber Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement.
The lease term is 6 years, with equal annual rental payments of $3,938 at the beginning 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 building has a fair value of $22,700, a book value to Cullumber of $15,700, and a useful life of 7 years.
At the end of the lease term, Cullumber and Walsh expect there to be an unguaranteed residual value of $3,925.
1.
2.
3.
4.
5.
Cullumber wants to earn a return of 7% on the lease, and collectibility of the payments is probable. This rate is known by
Walsh.
Transcribed Image Text:Cullumber Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement. The lease term is 6 years, with equal annual rental payments of $3,938 at the beginning 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 building has a fair value of $22,700, a book value to Cullumber of $15,700, and a useful life of 7 years. At the end of the lease term, Cullumber and Walsh expect there to be an unguaranteed residual value of $3,925. 1. 2. 3. 4. 5. Cullumber wants to earn a return of 7% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.
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