FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels.
- The equipment cost Nevels $779,677 and has an expected economic life of five years.
- Nevels expects the residual value on December 31, 2027, will be $103,000.
- Negotiations led to the lessee guaranteeing a $146,000 residual value.
- Equal payments under the lease are $203,000 and are due on December 31 of each year with the first payment being made on December 31, 2024.
- Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
- Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease.
- Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease.
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