"On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purch...
"On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purchased the equipment for a cost of 50,000. The lease agreement specifies Four annual payments of $15,000 beginning January 1, 20x4, the beginning of the lease, and at each December 31 from 20x4 to 20x8. The four year term ending December 31, 20x8, is equal to 50% of the estimated useful life of the equipment. Smoothie LLC routinely acquires smoothie equipment for lease to other vendors. The interest rate in these financing agreements is 10%. Determine if the lease is a Finance Lease or Operating Lease and book the appropriate Journal Entries for 20x4 relating to the lease "
Homework Answers
As the present value of mininum lease payment is greater than fair value of assets therefore lease in Finance Lease.
01.01.2004 Gross Assets 52303
Lease Liability 52303
01.01.2004 Lease Liability 15000
Cash 15000
31.12.2004 Lease Liability 13636
Interest 1364
Cash 15000
31.12.2004 Depreciation 13075.75
Accumulated Depreciation 13075.75
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"On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purch...
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