Problem 2 On January 1, Year 1, Marco Company leased equipment from Wilson Corp. Lease payments of $200,000 are to be made every January 1 for 10 years. Title does not pass at the end of the lease term, and the lease does not include a bargain purchase option. The lease is non- cancelable. Additional Facts: ● ● ● The lease includes a guaranteed residual value of $40,000. The estimated useful life of the equipment on January 1, Year 1, is 25 years. The rate implicit in the lease is unknown to Marco. ● Marco's incremental borrowing rate is 8%. The fair value of the equipment is $1,800,000 on January 1, Year 1. ● 1. Record the journal entries for Marco on January 1, Year 1. 2. Record the journal entries for Marco on January 1, Year 2. (ignore end-of-year accruals) 3. Record the journal entries for Marco on January 1, Year 3. (ignore end-of-year accruals)
Problem 2 On January 1, Year 1, Marco Company leased equipment from Wilson Corp. Lease payments of $200,000 are to be made every January 1 for 10 years. Title does not pass at the end of the lease term, and the lease does not include a bargain purchase option. The lease is non- cancelable. Additional Facts: ● ● ● The lease includes a guaranteed residual value of $40,000. The estimated useful life of the equipment on January 1, Year 1, is 25 years. The rate implicit in the lease is unknown to Marco. ● Marco's incremental borrowing rate is 8%. The fair value of the equipment is $1,800,000 on January 1, Year 1. ● 1. Record the journal entries for Marco on January 1, Year 1. 2. Record the journal entries for Marco on January 1, Year 2. (ignore end-of-year accruals) 3. Record the journal entries for Marco on January 1, Year 3. (ignore end-of-year accruals)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 6E: Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on...
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Step 1
Lease Liability:
Lease liability is the amount of liability that a lessee should record in the financial statements, it can be treated as the rent for using leased asset. The generally accepted accounting principles require companies to record the remaining lease liability after every lease payment.
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