Question

Sheridan Incorporated leases a piece of machinery to Concord Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $10.535 to be made at the beginning of each year. 2. The machinery' has a fair value of $56,388, a book value of $42,080, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of $21,040. To protect against a large loss, Sheridan requests Concord to guarantee $14,530 of the residual value, which Irving agrees to do. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Concord. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a and for the lessor, it is a e Textbook and Media List of Accounts Prepare the journal entries for Concord for the year 2020. (Credit account titles are automatically indented when the 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 present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 5,275.) Debit Credit Date Account Titles and Explanation Jan. 1 (To record lease) Jan. 1 (To records first lease payment) Dec 31 (To record accrued interest) Dec. 31 (To record amortization expense) eTextbook and Media

Answer 1

Date	Particulars	Debit	credit
Jan-01	Fixed Asset - Machinery	$56,388.00
	Lease Payable - Sheridian		$56,388.00
	( Leas Recordeded)
Jan-01	Lease rent	$10,535.00
	Cash		$10,535.00
	( recorded 1st Lease payement
Jan-01	Interst exp (56388*5%)	$2,819.00
	Interest accrued on lease		$2,819.00
	( Interest Booked
Jan-01	Lease Payable Dr	$13,082.68
	Lease amortization		$13,082.68