Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the equipment at a cost of $200,000. The equipment has a fair value of $260,000. Information related to the lease appears below: Lease term 5 years First lease payment January 1, 2023 Subsequent lease payments December 31, 2023, 2024, 2025, 2026 Economic life of the equipment 6 years Estimated value of equipment at end of economic life $0 Purchase option, reasonably expected to be exercised by Oscar $20,000 Implicit and incremental borrowing rate 8% 3. Prepare the entries to record the lease and the first payment for both the lessee and the lessor on January 1, 2023

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the
equipment at a cost of $200,000. The equipment has a fair value of $260,000.
Information related to the lease appears below:
Lease term 5 years
First lease payment January 1, 2023
Subsequent lease payments December 31, 2023, 2024, 2025, 2026
Economic life of the equipment 6 years
Estimated value of equipment at end of
economic life $0
Purchase option, reasonably expected
to be exercised by Oscar $20,000
Implicit and incremental borrowing rate 8%

3. Prepare the entries to record the lease and the first payment for both the lessee and the lessor on
January 1, 2023

 

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