80.2K

Verified Solution

Link Copied!

Just help me with the question b. Thank you!

Gordon Company, as lessee, enters into a lease agreement on July 1, 2012, for equipment. T 1. The term of the non-cancelable lease is 4 years, with no renewal option. Payments of $234,827 are due at the July 1, 2012 signing and each July 15l during the term of the lease agreement. ii. The fair value of the equipment on July 1, 2012 is $840,000. The equipment has an economic life of 6 years with no salvage value. iii. Gordon depreciates similar machinery it owns on the straight-line basis for the portion iv. The lessee pays all executory costs. V. Gordon's incremental borrowing rate is 1096 per year. The lessee is aware that the lessor used an implicit rate of 896 in computing the lease payments. The present value factor for an annuity due of 4 periods at 8% is 3.5771; at 10% it is 3.48685. Requirements: a. Indicate the type of lease Gordon Company has entered into operating or ce SSL factor for an annuity due of 4 periods at 896 is 3.5771; at 10% it is 3.48685. equirements: a. Indicate the type of lease Gordon Company has entered into operating or capital and why it is that type. b. Provide a partial amortization schedule, sufficient to support journal entries through December 31, 2013 c. Prepare the journal entries on Gordon's books that relate to the lease agreement for the following 4 dates: Round all amounts to the nearest dollar) Only year-end, not quarter-end, accruals are done. Gordon has a Dec uly 1, 2012 December 31, 2012, uly 1, 2013 December 31, 2013. 34,827 * 3.57710 = $840,000 ause the Present value of the lease payment($840,000) equals the fair value, $840,000, of the leased property

Answer & Explanation Solved by verified expert

See Answer