On October 1, 20X1, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 20X2. Vaughn’s incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required:At what amount should Vaughn record the leased equipment on October 1, 20X1? (Round your answer to the nearest whole dollar.)What is the amount of lease expense that Vaughn should record for the year ended December 31, 20X1, and for the year ended December 31, 20X2?How much of the lease liability should be classified as current on December 31, 20X1, and December 31, 20X2? (Round your intermediate calculations and final answers to 2 decimal places.)

A lease is an implied or written contract that outlines the terms and conditions under which the…

Answered: On October 1, 20X1, Vaughn, Inc.,…

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On October 1, 20X1, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 20X2. Vaughn’s incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.)

Required:

At what amount should Vaughn record the leased equipment on October 1, 20X1? (Round your answer to the nearest whole dollar.)
What is the amount of lease expense that Vaughn should record for the year ended December 31, 20X1, and for the year ended December 31, 20X2?
How much of the lease liability should be classified as current on December 31, 20X1, and December 31, 20X2? (Round your intermediate calculations and final answers to 2 decimal places.)

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