On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $416, 676 and has an expected economic life of five years. Aqua and Maywood expect the residual value at December 31, 2027, to be $ 54,000. Negotiations led to Maywood guaranteeing a $76,000 residual value. Equal payments under the lease are $108,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease.
On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $416, 676 and has an expected economic life of five years. Aqua and Maywood expect the residual value at December 31, 2027, to be $ 54,000. Negotiations led to Maywood guaranteeing a $76,000 residual value. Equal payments under the lease are $108,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a
four-year period ending December 31, 2027, at which time possession of the leased asset
will revert back to Aqua. The equipment cost Aqua $416,676 and has an expected economic
life of five years. Aqua and Maywood expect the residual value at December 31, 2027, to be $
54,000. Negotiations led to Maywood guaranteeing a $76,000 residual value. Equal
payments under the lease are $108,000 and are due on December 31 of each year with the
first payment being made on December 31, 2024. Maywood is aware that Aqua used a 6%
interest rate when calculating lease payments. Required: 1. & 2. Prepare the appropriate
entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease.
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