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Concept explainers
Classification as Finance or Operating Lease, Lessee,
- Annual rental payments of $57,900 are due on January 1 of each year, beginning on January 1, 2018. The lease agreement does not include any nonlease components.
- The lease term is 5 years
- There is no residual value and no purchase option.
- The economic life of the asset is 5 years.
- The lessee s incremental borrowing rate is 5% and the lessee does not know the lessor's implicit rate.
TLC indicates that collectability of all lease payments is reasonably assured. Delaware Rivers
Required
- a. Classify the lease as either a finance lease or an operating lease for Delaware River Company, the lessee.
- b. Prepare the journal entries at lease commencement and the first lease payment for the lessee.
- c. Prepare an amortization table for the lease.
- d. Prepare the journal entries at the end of the first year and for the second lease payment for Delaware River Company, the lessee.
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Chapter 18 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
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- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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