Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. problem 10 lessee with guaranteed residual value

Problem 10 Lessee with Guaranteed Residual Value On January 1,1999, B Company leased...

60.1K

Verified Solution

Question

Accounting

Problem 10
Lessee with Guaranteed Residual Value
On January 1,1999, B Company leased a concrete truck with a fair value of $265,000 from E Company on the following terms.
a. Noncancelable lease for 6 years
b. Lease payments of $52,500 per year. First payment is made on 1-1-19xx, and other payments are made on Dec. 31.
c. Estimated residual value is $45,890 and B Company guarantees residual value.
d. Estimated economic life of the truck is 9 years.
e. B's incremental borrowing rate is 13% a year. Implicit rate is 12%.
Required
Page 2 of 4
Is this a capital lease or operating lease. Why?
Instructions: Prepare journal entries on the books of the lessee through the first two years.
The accounting period of A and B Company ends on December 31.
image

Answer & Explanation Solved by verified expert
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

Other questions asked by students

Advance Math
1.2K views

Find all primes p for which ?5 is a quadratic residue.

Finance
1.2K views

a certain hospital is considering setting up a new facility. Management estimates that it will cost...

Accounting
1.2K views

Prospero Corporation’s total overhead costs at various levels of activity are presented below: Month Machine-Hours Total Overhead Costs August 8,000 $119,400 September 12,000 $142,800 October 16,000 $166,200 November 4,000 $93,120 Assume that...

Geometry
1.2K views

circumference of a circle with a radius of 27 feet

Statistics
1.2K views

1 75 6 Let x denote the number of cars sold at Hatton Ford during...

Algebra
1.2K views

3 Find the prodl 3 2x 5x 1 4x2 x 3 6x 5

Accounting
1.2K views

3 In July, 17,800 actually meals were served. The company's flexible budget for...

Accounting
1.2K views

PEYTON APPROVED TRIAL BALANCE 2018 *******Step Five: Prepare the unadjusted trial balance. Note...

Accounting
1.2K views

Bank Three currently has $500 million in transaction deposits on its balance sheet. The Federal...

Accounting
1.2K views

What does the federal wiretapping law permit? What does it prohibit?

Accounting
1.2K views

1. Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends. 2....

Accounting
1.2K views

the 11-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The...