Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the equipment at a cost of $200,000. The equipment has a fair value of $260,000. Information related to the lease appears below: Lease term 5 years First lease payment January 1, 2023 Subsequent lease payments December 31, 2023, 2024, 2025, 2026 Economic life of the equipment 6 years Estimated value of equipment at end of economic life $0 Purchase option, reasonably expected to be exercised by Oscar $20,000 Implicit and incremental borrowing rate 8% 3. Prepare the entries to record the lease and the first payment for both the lessee and the lessor on January 1, 2023
Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the equipment at a cost of $200,000. The equipment has a fair value of $260,000. Information related to the lease appears below: Lease term 5 years First lease payment January 1, 2023 Subsequent lease payments December 31, 2023, 2024, 2025, 2026 Economic life of the equipment 6 years Estimated value of equipment at end of economic life $0 Purchase option, reasonably expected to be exercised by Oscar $20,000 Implicit and incremental borrowing rate 8% 3. Prepare the entries to record the lease and the first payment for both the lessee and the lessor on January 1, 2023
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.7E
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54
Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the
equipment at a cost of $200,000. The equipment has a fair value of $260,000.
Information related to the lease appears below:
Lease term 5 years
First lease payment January 1, 2023
Subsequent lease payments December 31, 2023, 2024, 2025, 2026
Economic life of the equipment 6 years
Estimated value of equipment at end of
economic life $0
Purchase option, reasonably expected
to be exercised by Oscar $20,000
Implicit and incremental borrowing rate 8%
3. Prepare the entries to record the lease and the first payment for both the lessee and the lessor on
January 1, 2023
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