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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Use the information in RE20-1. Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.

To determine

Prepare the journal entries for the transactions during the first year of lease.

Explanation

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Prepare the journal entries for the transactions during the first year of lease:

DateAccounts title and ExplanationDebit ($)Credit ($)
 Right-of-use asset$58,684.19 
     Lease liability $48,684.19
     Cash $10,000
 (To record right-to-use and lease liability)  
    
 Lease expenses$10,000 
     Lease liability $4,868...

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