On January 1, 2017, Seven Wonders Inc. signed a five-year noncancelable lease with Moss Company. The lease calls for five payments of $277,409.44 to be made at the end of each year. The leased asset has a fair value of $1,200,000 on January 1, 2017. Seven Wonders cannot renew the lease, there is no bargain purchase option, and ownership of the leased asset reverts to Moss at the lease end. The leased asset has an expected useful life of six years, and Seven Wonders uses straight-line depreciation for financial reporting purposes. Its incremental borrowing rate is 12%. Moss’s implicit rate of return on the lease is unknown. Seven Wonders uses a calendar year for financial reporting purposes. Both companies use ASC 840 to account for leases. Use tables (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.)
Required:
- Prepare an amortization schedule for the lease liability.
- Prepare the journal entry to record.
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On January 1, 2017, Seven Wonders Inc. signed a five-year
noncancelable lease with Moss Company. The...
On January 1, 2017, Seven Wonders Inc. signed a five-year noncancelable lease with Moss Company. The...
On January 1, 2017, Seven Wonders Inc. signed a five-year noncancelable lease with Moss Company. The lease calls for five payments of $277,409.44 to be made at the end of each year. The leased asset has a fair value of $1,200,000 on January 1, 2017. Seven Wonders cannot renew the lease, there is no bargain purchase option, and ownership of the leased asset reverts to Moss at the lease end. The leased asset has an expected useful life of six...
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