LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Oriole, Inc. for 3 years. The lease calls for annual lease payments of $19,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 5%. (Credit account titles are automatically indented when the 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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation 1/1/25 1/1/25 Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) 12/31/25 Lease Expense Lease Liability Right-of-Use Asset Debit 52423 19000 19000 Credit 52423 19000
LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Oriole, Inc. for 3 years. The lease calls for annual lease payments of $19,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 5%. (Credit account titles are automatically indented when the 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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation 1/1/25 1/1/25 Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) 12/31/25 Lease Expense Lease Liability Right-of-Use Asset Debit 52423 19000 19000 Credit 52423 19000
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 12P: Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease...
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Transcribed Image Text:LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Oriole, Inc. for 3 years. The lease calls for annual
lease payments of $19,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase
option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease
payments is less than 90% of the fair value of the equipment.
Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the
implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 5%. (Credit account titles are automatically
indented when the 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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as
displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the
order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
1/1/25
1/1/25
Right-of-Use Asset
Lease Liability
(To record lease liability)
Lease Liability
Cash
(To record lease payment)
12/31/25
Lease Expense
Lease Liability
Right-of-Use Asset
Debit
52423
19000
19000
Credit
52423
19000
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