Delray Leasing Company signs an agreement on January 1, 2020, to lease equipment to Swifty Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6years. 2. The fair value of the asset at January 1, 2020, is $118,700. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,600, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $26,886.99 to the lessor, beginning on January 1, 2020. 5. The lessee’s incremental borrowing rate is 6%. The lessor’s implicit rate is 5% and is unknown to the lessee. 6. Swifty uses the straight-line depreciation method for all equipment.
Accounting
Delray Leasing Company signs an agreement on January 1, 2020, to lease equipment to Swifty Company. The following information relates to this agreement.
| 1. | The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6years. | |
| 2. | The fair value of the asset at January 1, 2020, is $118,700. | |
| 3. | The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,600, none of which is guaranteed. | |
| 4. | The agreement requires equal annual rental payments of $26,886.99 to the lessor, beginning on January 1, 2020. | |
| 5. | The lessee’s incremental borrowing rate is 6%. The lessor’s implicit rate is 5% and is unknown to the lessee. | |
| 6. | Swifty uses the |
Click here to view factor tables.
Prepare all of the
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
choose a transaction date 1/1/2012/31/20 |
enter an account title to record the lease |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the lease |
enter a debit amount |
enter a credit amount |
|
|
(To record the lease) |
|||
|
choose a transaction date 1/1/2012/31/20 |
enter an account title to record the first lease payment |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the first lease payment |
enter a debit amount |
enter a credit amount |
|
|
(To record the first lease payment) |
|||
|
choose a transaction date 1/1/2012/31/20 |
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
Step by step
Solved in 2 steps
