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Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31, 2025 Leased Equipment (To record leased asset and related liability.) December 31,2025 Lease Expense Cash Debit 235000 47000 Credit 235000 17000

Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31, 2025 Leased Equipment (To record leased asset and related liability.) December 31,2025 Lease Expense Cash Debit 235000 47000 Credit 235000 17000

Intermediate Accounting: Reporting And Analysis
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
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...
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Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, e.g. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31, 2025 Leased Equipment (To record leased asset and related liability.) December Lease Expense 31, 2025 Cash Debit 235000 47000 Credit 235000 47000
Transcribed Image Text:Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, e.g. 58,971. List all debit entries before credit entries.) Date Account Titles and Explanation December 31, 2025 Leased Equipment (To record leased asset and related liability.) December Lease Expense 31, 2025 Cash Debit 235000 47000 Credit 235000 47000
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