Partially correct answer icon Your answer is partially correct. Carla Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Carla guarantees the lessor a residual value of $19,400 at the end of the lease. However, Carla believes it is probable that the expected residual value at the end of the lease term will be $9,700. The equipment has a useful life of 7 years. Prepare Carlas' December 31, 2019, journal entries assuming the implicit rate of the lease is 9% and this is known to Carla. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 (To record the lease liability) December 31, 2019 (To record lease payment)
Partially correct answer icon Your answer is partially correct. Carla Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Carla guarantees the lessor a residual value of $19,400 at the end of the lease. However, Carla believes it is probable that the expected residual value at the end of the lease term will be $9,700. The equipment has a useful life of 7 years. Prepare Carlas' December 31, 2019, journal entries assuming the implicit rate of the lease is 9% and this is known to Carla. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 (To record the lease liability) December 31, 2019 (To record lease payment)
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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Partially correct answer icon
Your answer is partially correct.
Carla Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Carla guarantees the lessor a residual value of $19,400 at the end of the lease. However, Carla believes it is probable that the expected residual value at the end of the lease term will be $9,700. The equipment has a useful life of 7 years.
Prepare Carlas' December 31, 2019,journal entries assuming the implicit rate of the lease is 9% and this is known to Carla. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Click here to view factor tables.
Prepare Carlas' December 31, 2019,
Click here to view factor tables.
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Date
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Account Titles and Explanation
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Debit
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Credit
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December 31, 2019
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|
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|
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(To record the lease liability)
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|||
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December 31, 2019
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(To record lease payment)
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Expert Solution
Step 1
SOLUTION
WORKING -
COMPUTING PRESENT VALUE OF LEASE LIABILITY-
| YEAR | PAYMENTS | PV OF $1 | PV |
| 0 | 37300 | 1 | 37300 |
| 1 | 37300 | 0.917 | 34201.10 |
| 2 | 37300 | 0.842 | 31406.6 |
| 3 | 37300 | 0.772 | 28718.4 |
| 4 | 37300 | 0.708 | 26408.4 |
| 5 | 37300 | 0.650 | 24245 |
| 6 | 37300 | 0.596 | 22230.8 |
| 7 | 9700 | 0.547 | 5305.9 |
| TOTAL | 209816.2 |
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