Question

Question 6 On December 31, 2019, Burke Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke's incremental borrowing rate is 5%, and the lessor's implicit rate is unknown. Click here to view factor tables. Your answer is correct. What type of lease is this? This is a/an finance lease SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT Your answer is correct. Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to o decimal places e.g. 5,275.) Present value of the lease payments 39405 SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT

Answer 1

Answer:- 3.

Date particulars. Debit. Credit

Dec.31 2019. Right of use Asset. $39405

To Lease liability $39405

(To record the lease)

Dec.31 2019. Lease liability. $8668

To Cash. $8668

(To record first Lease Payment)

Dec. 31 2020. Amortization $7881

Expenses(39405/5)

To right to use Asset. $7881

(To record amortization of the right of use asset)

Dec. 31 2020 . Interest expenses

(39405-8668)*5% $1537

Lease liability.

(8668-1537). $ 7131

To Cash. $8668

( To record Interest expense)