Please show work Problem 3.1: Chapter 21 - Leases (13 points) On January 1,...
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Problem 3.1: Chapter 21 - Leases (13 points) On January 1, 2020, Sindri and Brokkr, Inc. lease a blacksmith warehouse from Hephaestus, Corp. The lease terms are as below. a Lease Term (yrs) Minimum Lease Payment Fair Value Asset Cost (on Stitch's Books) Asset Life (yrs) 51 $75,000 $25,000,000 $13,000,000 1,500 Guaranteed Residual Value Expected Residual Value Ownership at End of Lease Purchase Option @ End of Lease $0 $300,000 Hephaestus, Corp. $24,000,000 If applicable, Hephaestus depreciates all assets on a straight-line basis. Sindri and Brekkr, Inc uses 12% as its required rate of return when calculating lease returns and is unaware of Hephaestus, Corp marginal borrowing rate. All amounts are paid on January 1 of each year. Both Sindri and Brokkt, Inc. and Hephaestus, Corp have December 31 year-ends. REQUIRED: Answers the following for Sindri and Brokkr, Inc.: (PLEASE CLEARLY SHOW AND LABEL YOUR WORK) (a) [2 pts] What is the classification of this lease and why? (b) [4 pts] What is the journal entry for January 1, 2020? ( ) [3 pts] What is the journal entry for December 31, 2020? (d) [2 pts] What is the journal entry for January 1, 2021? (e) [2 pts] What is the journal entry for December 31, 2021
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