On January 1, Year 1, Lakeshore Gelato (Lessee) leases nonspecialized equipment for 5 years, agreeing...
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On January Year Lakeshore Gelato Lessee leases nonspecialized equipment for years, agreeing to pay $ annually at the beginning of each year under the noncancelable lease. Gelato Equipment Company, the lessor, agrees to remit all executory costs, estimated to be $ per year. The cost of the equipment is $ and the fair value of the equipment is $ Its estimated life is years. The estimated residual value at the end of years is $ and is not guaranteed by Lakeshore Gelato; at the end of years, it is $ There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is On October of each year, Gelato Equipment Company pays property taxes of $ maintenance costs of $ and insurance of $ Straightline depreciation is considered the appropriate method by both companies. REQUIRED: Identify the type of lease involved for Lakeshore Gelato and Gelato Equipment Company and give reasons for your classifications. Prepare appropriate journal entries for Year for the lessee and lessor.
On January Year Lakeshore Gelato Lessee leases nonspecialized equipment for years, agreeing to pay $ annually at the beginning of each year under the noncancelable lease.
Gelato Equipment Company, the lessor, agrees to remit all executory costs, estimated to be $ per year.
The cost of the equipment is $ and the fair value of the equipment is $
Its estimated life is years.
The estimated residual value at the end of years is $ and is not guaranteed by Lakeshore Gelato; at the end of years, it is $
There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee.
The implicit interest rate is
On October of each year, Gelato Equipment Company pays property taxes of $ maintenance costs of $ and insurance of $
Straightline depreciation is considered the appropriate method by both companies.
REQUIRED:
Identify the type of lease involved for Lakeshore Gelato and Gelato Equipment Company and give reasons for your classifications.
Prepare appropriate journal entries for Year for the lessee and lessor.
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