Prepare Bridgeport’s 2020 journal entries.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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29.

On January 1, 2020, Bridgeport Animation sold a truck to Peete Finance for $37,000 and immediately leased it back. The truck was carried on Bridgeport’s books at $31,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Bridgeport at lease-end. The lease requires three equal rental payments of $11,000 at the end of each year (first payment on January 1, 2021). The appropriate rate of interest is 7%, the truck has a useful life of 5 years, and the residual value at the end of the lease term is expected to be $14,000, none of which is guaranteed.

Prepare Bridgeport’s 2020 journal entries(Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)

Click here to view factor tables.

Date
Account Titles and Explanation
Debit
Credit
                                                           
 
 
 
 
 
 
 
 
 
 
 
  (To record sale of truck)    
                                                           
 
 
 
 
 
 
 
  (To record lease liability)    
                                                           
 
 
 
 
 
 
 
 
 
 
 
Expert Solution
Step 1

Lease liability refers to obligation of the company requires to pay periodic lease payment on the lease discounted it to its present value.

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