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Assume that on December 31,2024, Blossom Aerospace signs a 8-year, non-cancelable lease agreement to lease...

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Accounting

Assume that on December 31,2024, Blossom Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement:
The agreement requires equal rental payments of $161,178 beginning on December 31,2024.
The fair value of the building on December 31,2024 is $1,092,117.
The building has an estimated economic life of 10 years, a guaranteed residual value of $49,700, and an expected residual value of $34,800. Blossom depreciates similar buildings on the straight-line method.
The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
Blossom's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Blossom.
Date
Account Titles and Explanation
Debit
Credit
(To record the lease)
(To record first lease payment)
(To record amortization of the right-of-use asset)
(To record second lease payment)
(To record amortization of the right-of-use asset)
(To record third lease payment)
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