Carla Vista Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement.1. The lease term is 4 years, with equal annual rental payments of $4,901 at the beginning of each year.2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.3. The building has a fair value of $20,300, a book value to Carla Vista of $13,300, and a useful life of 5 years.4. At the end of the lease term, Carla Vista and Walsh expect there to be an unguaranteed residual value of $3,325.5. Carla Vista wants to earn a return of 7% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.Click here to view factor tables. (b)Using the original facts of the lease, show the journal entries to be made by both Carla Vista and Walsh in 2020. (For calculationpurposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g.5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)Carla Vista Journal EntriesDateAccount Titles and ExplanationDebitCredit(To record the lease)(To record lease payment) Walsh's Journal EntriesDateAccount Titles and ExplanationDebitCredit(To record the lease)(To record lease payment)(To record interest expense)(To record amortization of the right-of-use asset)

Lessor and Lessee agreements: A lease of immovable property is a transfer of a right to enjoy such…

Answered: Walsh's Journal Entries Date Account…

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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Carla Vista Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement.

1.		The lease term is 4 years, with equal annual rental payments of $4,901 at the beginning of each year.
2.		Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.
3.		The building has a fair value of $20,300, a book value to Carla Vista of $13,300, and a useful life of 5 years.
4.		At the end of the lease term, Carla Vista and Walsh expect there to be an unguaranteed residual value of $3,325.
5.		Carla Vista wants to earn a return of 7% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.

Click here to view factor tables.

(b)
Using the original facts of the lease, show the journal entries to be made by both Carla Vista and Walsh in 2020. (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. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Carla Vista Journal Entries
Date
Account Titles and Explanation
Debit
Credit
(To record the lease)
(To record lease payment)

Walsh's Journal Entries
Date
Account Titles and Explanation
Debit
Credit
(To record the lease)
(To record lease payment)
(To record interest expense)
(To record amortization of the right-of-use asset)

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Walsh's Journal Entries Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset)