Concept explainers
Classification as Finance or Operating Lease, Lessor,
Required
- a. Determine the lessor s classification of the lease.
- b. Measure the right-of-use asset and the lease liability at January 1, 2019 and prepare the lessee s amortization table
- c. Prepare the journal entries for Stewart Standard for 2019
E18-15 Classification as Finance or Operating Lease, Lessee, Lessor, Journal Entries, Sales-Type Lease, Discount Rates, Annuity Due, Nonlease Components. On January 1, 2019, Kane Kite Company leased a nonspecialized fabric-cutting machine from Stewart Standard, Inc. Under the terms of the lease Kane Kite must pay $200,000 on January 1 of each year, starting in 2019, over a 9-year term. The lease terms do not contain a transfer of ownership, and there is no purchase option. There is also no residual value specified in the contract. The cutting machine has a useful life of 9 years and Kane Kite
Required
- a. What type of lease is this for both the lessee and lessor?
- b. Prepare the lease amortization table for the lease term
- c. Prepare the journal entries necessary for Stewart Standard on January 1, 2019, and on December 31, 2019.
- d. Prepare the journal entries necessary for Kane Kite Company on January 1, 2019, and on December 31, 2019.
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