On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment costs Aqua $421,168 and has an expected economic life of five years. Aqua and Maywood expect the residual value at December 31, 2024, to be $58,000. Negotiations led to Maywood guaranteeing a $82,000 residual value. Equal payments under the lease are $116,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 5% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2021, and December 31, 2021, related to the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)
Exercise 15-27 (Algo) Lessee; lessee guaranteed residual value [LO15-2, 15-6]
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment costs Aqua $421,168 and has an expected economic life of five years. Aqua and Maywood expect the residual value at December 31, 2024, to be $58,000. Negotiations led to Maywood guaranteeing a $82,000 residual value.
Equal payments under the lease are $116,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 5% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. & 2. Prepare the appropriate entries for Maywood on January 1, 2021, and December 31, 2021, related to the lease. (If no entry is required for a transaction/event, select "No
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