Question 11 The following facts pertain to a non-cancelable lease agreement between Carla Vista Leasing...
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Accounting
Question 11
The following facts pertain to a non-cancelable lease agreement between Carla Vista Leasing Company and Tamarisk Company, a lessee.
Commencement date
May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020
$15,138.16
Bargain purchase option price at end of lease term
$4,000
Lease term
5
years
Economic life of leased equipment
10
years
Lessors cost
$50,000
Fair value of asset at May 1, 2020
$68,000
Lessors implicit rate
8
%
Lessees incremental borrowing rate
8
%
The collectibility of the lease payments by Carla Vista is probable.
1. Discuss the nature of this lease to Tamarisk
2. Discuss the nature of this lease to Carla Vista.
3. Prepare the journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Tamarisks annual accounting period ends on December 31. Reversing entries are used by Tamarisk. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15. Record journal entries in the order presented in the problem.)
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