On December 31, 2019, Kingbird Corporation signed a 6-year, non-cancelable lease for a machine. The...
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On December 31, 2019, Kingbird Corporation signed a 6-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $12,415 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 8 years and a $6,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of depreciation for all of its plant assets. Kingbirds incremental borrowing rate is 8%, and the lessors implicit rate is unknown.
a) Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)
Present value of the lease payments
$enter the present value of the lease payments in dollars rounded to 0 decimal places
b) Prepare all necessary journal entries for Kingbird for this lease through December 31, 2020.
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