Annual Rental payment: $121,434 Present value of minimum lease payments: $650,312 Prepare the...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Annual Rental payment: $121,434
Present value of minimum lease payments: $650,312
Prepare the journal entries Pronghorn would make in 2025 and 2026 related to the lease agreement (the green boxes are correct)
Sage Leasing Company agrees to lease equipment to Pronghorn Corporation on January 1,2025 . The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $489,000, and the fair value of the asset on January 1,2025 , is $699,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Pronghorn estimates that the expected residual value at the end of the lease term will be $60,000. Pronghorn amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 5. The collectibility of the lease payments is probable. 6. Sage desires a 9\% rate of return on its investments. Pronghorn's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.)
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.