Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Sharrer has an incremental borrowing rate of 9%. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals of $34,133 are payable on each January 1st, beginning January 1, 2017. Present value of an ordinary annuity of 1 for 3 periods at 8% : 2.57710 Present value of an ordinary annuity of 1 for 3 periods at 9% : 2.53130 Present value of annuity due of 1 for 3 periods at 8% : 2.78324 Present value of an annuity due of 1 for 3 periods at 9% : 2.75911 Please indicate what the lessee would record for the following journal entries in 2017. Round to the nearest whole dollar. Dr. ROU Asset Cr. Lease Liability Dr. Interest Expense Cr. Interest Payable
Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Sharrer has an incremental borrowing rate of 9%. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals of $34,133 are payable on each January 1st, beginning January 1, 2017.
Present value of an ordinary annuity of 1 for 3 periods at 8% : 2.57710
Present value of an ordinary annuity of 1 for 3 periods at 9% : 2.53130
Present value of annuity due of 1 for 3 periods at 8% : 2.78324
Present value of an annuity due of 1 for 3 periods at 9% : 2.75911
Please indicate what the lessee would record for the following
Dr. ROU Asset
Cr. Lease Liability
Dr. Interest Expense
Cr. Interest Payable
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