On January 1, 2018, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year...

90.2K

Verified Solution

Question

Accounting

On January 1, 2018, Allied Industries leased a high-performanceconveyer to Karrier Company for a four-year period ending December31, 2021, at which time possession of the leased asset will revertback to Allied. The equipment cost Allied $929,000 and has anexpected useful life of five years. Allied expects the residualvalue at December 31, 2022, will be $313,000. Negotiations led tothe lessee guaranteeing a $366,000 residual value.
Equal payments under the finance/sales-type lease are $213,000and are due on December 31 of each year with the first paymentbeing made on December 31, 2018. Karrier is aware that Allied useda 6% interest rate when calculating lease payments. (FV of $1, PVof $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.)
Required:
1. Prepare the appropriate entries for bothKarrier and Allied on January 1, 2018, to record the lease.
2. Prepare all appropriate entries for bothKarrier and Allied on December 31, 2018, related to the lease.

Answer & Explanation Solved by verified expert

4.1 Ratings (664 Votes)

Journal entries in the Books of Karrier Lessee Sl No Date Particulars Ref DrCr Amount 1 01Jan18 High Performance Conveyor Dr 929000 To Allied Industries Cr 929000 Being High performance conveyor taken and acquired on lease 2 31Dec18 Interest Expense Ac Dr 83231 To Allied Industries Cr 83231 Being Interest See Answer

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!

Become a Member