Cullumber Incorporated leases a piece of machinery to Bramble Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $15,278 to be made at the beginning of each year. 2. The machinery’ has a fair value of $80,086, a book value of $59,760, and an economic life of 10 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $29,880. To protect against a large loss, Cullumber requests Bramble to guarantee $21,160 of the residual value, which Irving agrees to do. 4. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Bramble. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a sales-type leasefinance leaseoperating lease, and for the lessor, it is a finance leasesales-type leaseoperating lease. eTextbook and Media Assistance Used List of Accounts Prepare the journal entries for Bramble for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To records first lease payment) Dec. 31 (To record accrued interest) Dec. 31 (To record amortization expense) eTextbook and Media List of Accounts Prepare the journal entries for Cullumber for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record lease revenue)

Cullumber Incorporated leases a piece of machinery to Bramble Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $15,278 to be made at the beginning of each year. 2. The machinery’ has a fair value of $80,086, a book value of $59,760, and an economic life of 10 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $29,880. To protect against a large loss, Cullumber requests Bramble to guarantee $21,160 of the residual value, which Irving agrees to do. 4. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Bramble. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a sales-type leasefinance leaseoperating lease, and for the lessor, it is a finance leasesales-type leaseoperating lease. eTextbook and Media Assistance Used List of Accounts Prepare the journal entries for Bramble for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To records first lease payment) Dec. 31 (To record accrued interest) Dec. 31 (To record amortization expense) eTextbook and Media List of Accounts Prepare the journal entries for Cullumber for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record lease revenue)

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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eTextbook and Media

Assistance Used

List of Accounts

Prepare the journal entries for Bramble for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1

	(To record lease)
Jan. 1

	(To records first lease payment)
Dec. 31

	(To record accrued interest)
Dec. 31

	(To record amortization expense)

eTextbook and Media

List of Accounts

Prepare the journal entries for Cullumber for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1



	(To record lease)
Jan. 1

	(To record first lease payment)
Dec. 31

	(To record lease revenue)

eTextbook and Media

List of Accounts

Evaluate the criteria for classification of the lease, and describe the nature of the lease, assuming that Bramble did not guarantee any amount of the expected residual value.

For the lessee, it is a sales-type leaseoperating leasefinance lease, and for the lessor, it is a operating leasefinance leasesales-type lease.

eTextbook and Media

List of Accounts

Suppose Bramble did not guarantee any amount of the expected residual value. Prepare the journal entries for Bramble for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1

	(To record lease)
Jan. 1

	(To record first lease payment)
Dec. 31


	(To record interest and amortization)

eTextbook and Media

List of Accounts

Suppose Bramble did not guarantee any amount of the expected residual value. Prepare the journal entries for Cullumber for the year 2020. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1

	(To record lease payments)
Dec. 31

	(To record lease revenue)
Dec. 31

	(To record depreciation)

eTextbook and Media

List of Accounts

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1.		The lease is to be for 4 years with rental payments of $15,278 to be made at the beginning of each year.
2.		The machinery’ has a fair value of $80,086, a book value of $59,760, and an economic life of 10 years.
3.		At the end of the lease term, both parties expect the machinery to have a residual value of $29,880. To protect against a large loss, Cullumber requests Bramble to guarantee $21,160 of the residual value, which Irving agrees to do.
4.		The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature.
5.		The implicit rate is 5%, which is known by Bramble.
6.		Collectibility of the payments is probable.