Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement: 1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option. 2. The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year. 3. The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19. 4. The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time. Required: Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement: 1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option. 2. The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year. 3. The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19. 4. The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time. Required: Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
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 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...
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Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
| 1. | The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option. |
| 2. | The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year. |
| 3. | The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19. |
| 4. | The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time. |
Required:
| Prepare the |
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