On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. Record the interest payable on Skysong’s books at December 31, 2017.
On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. Record the interest payable on Skysong’s books at December 31, 2017.
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms:
1. | Noncancelable term of 4 years. | |
2. | Rental of $8,525 per year (at beginning of each year). | |
3. | Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. | |
4. | Estimated economic life of the machine is 5 years. | |
5. | Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. |
Record the interest payable on Skysong’s books at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125. Credit account titles 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 0 for the amounts.)
Account Titles and Explanation
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Credit
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enter an account title
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enter a debit amount
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enter a credit amount
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enter an account title
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enter a debit amount
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enter a credit amount
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