Question

Kingbird Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $37,400 each, beginning December 31, 2019. In addition, Kingbird guarantees the lessor a residual value of $22,000 at the end of the lease. However, Kingbird believes it is probable that the expected residual value at the end of the lease term will be $12,000. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $160,000. Prepare Lost Ark's 2019 and 2020 journal entries, assuming the implicit rate of the lease is 11% and this is known to Kingbird. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit (To record the lease) (To record receipt of lease payment)

Answer 1

Pageno Journal Entriel for 2014 and 2020. Date Credit Dec- 31 2019 Account titleExplanation Debit Leak Receivable 188684 sales Revence 188684 Dec 31 (foor Equipment giveno cost of Goods sold Inventory (For Cost of Goods sold recorded 160,000 160 000 Decal 37400 38400 Cash Leak Receivable (For Cash Received for installment 1st 20 20 Dec-31 34400 20,759 Cash Leale Receivable Irtorelt Reverse(188684 34400)x11%) 16,641 (for cash Received for and installment) Pax of annual payment = 37400 x 4.6959 = 175,627 Prof Residual value = 22008 X 0.5935= 13057 188,6841