Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided: 1. Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee. 2. The cost and fair value of the car is $8,400. The car has an economic life of 5 years. 3. The interest rate implicit in the lease is 10%. 4. It is probable that Ravis will collect the lease payments. 5. Equal annual lease payments are due at the end of each year. Required: 1. Next Level What type of lease is this to Ravis Rent-A-Car Company? Why? 2. Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term. 3. Prepare the journal entries for 2019 and 2020 to record the lease agreement, the lease receipts, and the recognition of income on the books of Ravis Rent-A-Car

Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided: 1. Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee. 2. The cost and fair value of the car is $8,400. The car has an economic life of 5 years. 3. The interest rate implicit in the lease is 10%. 4. It is probable that Ravis will collect the lease payments. 5. Equal annual lease payments are due at the end of each year. Required: 1. Next Level What type of lease is this to Ravis Rent-A-Car Company? Why? 2. Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term. 3. Prepare the journal entries for 2019 and 2020 to record the lease agreement, the lease receipts, and the recognition of income on the books of Ravis Rent-A-Car

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 82P: Lorene, Inc., owns an apartment complex. The terms of Lorenes lease agreement require new tenants to...

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1.	Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.
2.	The cost and fair value of the car is $8,400. The car has an economic life of 5 years.
3.	The interest rate implicit in the lease is 10%.
4.	It is probable that Ravis will collect the lease payments.
5.	Equal annual lease payments are due at the end of each year.

1.	Next Level What type of lease is this to Ravis Rent-A-Car Company? Why?
2.	Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term.
3.	Prepare the journal entries for 2019 and 2020 to record the lease agreement, the lease receipts, and the recognition of income on the books of Ravis Rent-A-Car.