On January 1, 2014, Garfield Corp. (lessor) entered into anoncancellable lease agreement with Odie...

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On January 1, 2014, Garfield Corp. (lessor) entered into anoncancellable lease agreement with Odie Corp. (lessee) formachinery which was carried in Garfield’s accounting records at$2,265,000 and had a fair value of $2,400,000. Minimum leasepayments under the lease agreement, which expires on December 31,2023, total $3,550,000. Payments of $355,000 are due each January1. The first payment was made on January 1, 2014 when the leaseagreement was finalized. The interest rate of 10% which wasstipulated in the lease agreement is the implicit rate set by thelessor. The effective interest method is being used. Odie expectsthe machine to have a ten-year life with no residual value, and bedepreciated on a straight-line basis. Collectibility of the rentalsis reasonably assured, and there are no important uncertaintiessurrounding the costs yet to be incurred by Garfield. Both entitiesare small private corporations that follow ASPE.
Instructions
a. From the lessee's viewpoint, what kind of lease is the aboveagreement? From the lessor's viewpoint, what kind of lease is theabove agreement?
b. Ignoring income taxes, what should be the income reported byGarfield from the lease for calendar 2014?
c. Ignoring income taxes, what should be the expenses incurredby Odie from this lease for the calendar 2014?
d. What journal entries should be recorded by Odie Corp. onJanuary 1, 2014?
e. What journal entries should be recorded by Garfield Corp. onJanuary 1, 2014?

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In: AccountingOn January 1, 2014, Garfield Corp. (lessor) entered into anoncancellable lease agreement with Odie Corp....On January 1, 2014, Garfield Corp. (lessor) entered into anoncancellable lease agreement with Odie Corp. (lessee) formachinery which was carried in Garfield’s accounting records at$2,265,000 and had a fair value of $2,400,000. Minimum leasepayments under the lease agreement, which expires on December 31,2023, total $3,550,000. Payments of $355,000 are due each January1. The first payment was made on January 1, 2014 when the leaseagreement was finalized. The interest rate of 10% which wasstipulated in the lease agreement is the implicit rate set by thelessor. The effective interest method is being used. Odie expectsthe machine to have a ten-year life with no residual value, and bedepreciated on a straight-line basis. Collectibility of the rentalsis reasonably assured, and there are no important uncertaintiessurrounding the costs yet to be incurred by Garfield. Both entitiesare small private corporations that follow ASPE.Instructionsa. From the lessee's viewpoint, what kind of lease is the aboveagreement? From the lessor's viewpoint, what kind of lease is theabove agreement?b. Ignoring income taxes, what should be the income reported byGarfield from the lease for calendar 2014?c. Ignoring income taxes, what should be the expenses incurredby Odie from this lease for the calendar 2014?d. What journal entries should be recorded by Odie Corp. onJanuary 1, 2014?e. What journal entries should be recorded by Garfield Corp. onJanuary 1, 2014?