Concept explainers
Nonlease costs; lessor and lessee
• LO15–2, LO15–7
Branif Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Branif a 10%
Required:
Prepare the appropriate entries for both the lessee and lessor to record the second lease payment and depreciation on December 31, 2019, under each of three independent assumptions:
- 1. The lessee pays maintenance costs as incurred. The lessor pays insurance premiums as incurred. The lease agreement requires annual payments of $100,000.
- 2. The contract specifies that the lessor pays maintenance costs as incurred. The lessee’s lease payments were increased to $103,000 to include an amount sufficient to reimburse these costs.
- 3. The lessee’s lease payments of $103,000 included $3,000 for hazard insurance on the equipment rather than maintenance.
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INTERMEDIATE ACCT VOL.2>CUSTOM<
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