On January 2, 2018, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $139500 residual value of the asset at the end of the lease term. The expected value of the residual value is $50000. Brick’s incremental borrowing rate is 11%, however it knows that Cullumber’s implicit interest rate is 9%. What journal entry would Brick Co. make at January 1, 2019 to record the second lease payment? PV Annuity Due PV Ordinary Annuity PV Single Sum 9%, 5 periods 4.23972 3.88965 0.64993 11%, 5 periods 4.10245 3.69590 0.59345
Particulars | Amount | Present value factor @9% | Amount |
equal installments | 172000 | 4.23972 | $ 729,232 |
Residual value | 89500 | 0.64993 | $ 58,169 |
Total | $ 787,401 | ||
Lease liability | $ 787,401 | ||
Less:installment | $ (172,000) | ||
$ 615,401 | |||
Interest @ 9% | $ (55,386) | ||
$ 560,015 | |||
Entry: | |||
Accounts | debit | credit | |
Lease Liability | $ 116,614 | ||
Interest expense | $ 55,386 | ||
cash | $ 172,000 |
On January 2, 2018, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $139500 r...
On January 2, 2018, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $160,000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual value is $50,000. Brick's incremental borrowing rate is 10%, however it knows that Gold Star's implicit interest rate is 8%. What journal entry would Brick Co. make at January...
On January 2, 2020, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $160,000 each, payable beginning January 2, 2020. Brick Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual value is $50,000. Brick's incremental borrowing rate is 10%, however it knows that Gold Star's implicit interest rate is 8%. What journal entry would Brick Co. make at January...
Multiple Choice Question 87 On January 2, 2018, Blossom Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $158000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $98000 residual value of the asset at the end of the lease term. Brick’s incremental borrowing rate is 10%, however it knows that Blossom’s implicit interest rate is 8%. What journal entry would Brick Co. make at January 1, 2019 to record the second lease...
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Cullumber Leasing Company agrees to lease equipment to Riverbed Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $523,000, and the fair value of the asset on January 1, 2020, is $758,000. 3. At the end of the lease term, the asset reverts to the...
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