Blue Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Prepare Blue's journal entries on January 1, 2025, and December 31, 2025. Assume the annual lease payment is $49,000 at the beginning of each year, and Blue's incremental borrowing rate is 4%, which is the same as the lessor's implicit rate. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,265. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/25 1/1/25 12/31/25 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Lease Expense Lease Liability Right-of-Use Asset Debit 55118 49,000 49,000 Credit 55118 49,000 245 48755
Blue Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Prepare Blue's journal entries on January 1, 2025, and December 31, 2025. Assume the annual lease payment is $49,000 at the beginning of each year, and Blue's incremental borrowing rate is 4%, which is the same as the lessor's implicit rate. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,265. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/25 1/1/25 12/31/25 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Lease Expense Lease Liability Right-of-Use Asset Debit 55118 49,000 49,000 Credit 55118 49,000 245 48755
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Transcribed Image Text:Blue Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership,
contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present
value of the lease payments is less than 90% of the fair value of the asset leased.
Prepare Blue's journal entries on January 1, 2025, and December 31, 2025. Assume the annual lease payment is $49,000 at the
beginning of each year, and Blue's incremental borrowing rate is 4%, which is the same as the lessor's implicit rate. (List all debit entries
before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation
purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,265. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
1/1/25
1/1/25
12/31/25
Account Titles and Explanation
Right-of-Use Asset
Lease Liability
(To record lease liability)
Lease Liability
Cash
(To record lease payment)
Lease Expense
Lease Liability
Right-of-Use Asset
Debit
55118
49,000
49,000
Credit
55118
49,000
245
48755
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