1 answer

Exercise 21-1 On January 1, 2017, Cullumber Corporation signed a 5-year noncancelable lease for a machine....

Question:

Exercise 21-1 On January 1, 2017, Cullumber Corporation signed a 5-year noncancelable lease for a machine. The terms of the l
Prepare all necessary journal entries for Qullumber for this through anuary 1, 2018. (Credit account ales are automatically i
Exercise 21-1 On January 1, 2017, Cullumber Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Cullumber to make annual payments of $8,482 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful le of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Oulumber uses the straight-line method of depreciation for all of its plant assets. Cullumber's incremental borrowing rate is 9%, and the lessor's implicit rate is unknown. Click here to view factor tables Compute the present value of the minimum lease payments (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) The present value of the minimum lease payments SHOW LIST OF ACCOUNTS LINE TO TEXT
Prepare all necessary journal entries for Qullumber for this through anuary 1, 2018. (Credit account ales are automatically indented when amount is entered. Do not indent manually. If no entry is required select "No Entry for the account titles and enter for the amounts. Round answers to decimal places g. 58.971.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record first payment.) (To record depreciation) (Te record interest.) 1/1/18 (To record second payment.) Click if you would like to show Work for this questions on Show Work

Answers

Present value of lease payments = 8482 * PVAFD ( 95 , 5years)

= 8482 * 4.23972

= 35961

Date Account Titles Debit Credit
January 1, 2017 Leased Equipment 35961
35961
January 1, 2017 Lease Liability 8482
Cash 8482
December 31, 2017 Depreciation Expense 7192
       Accumulated Depreciation - Capital Leases 7192
[35961/5 years]
December 31, 2017 Interest Expense 2473
Interest Payable 2473
(35961-8482)*9%
January 1, 2018 Lease Liability 6009
Interest Payable 2473
Cash 8482
.

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