Maurice Tutor

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    Nov-2005 - Oct-2011

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    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 11.00

partial amortization

  Lessee accountingAc€??capital lease.Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The following data are relevant to the lease agreement:

1.   The term of the noncancelable lease is 4 years, with no renewal option. Payments of $782,757 are due on July 1 of each year.

2.   The fair value of the equipment on July 1, 2014 is $2,800,000. The equipment has an economic life of 6 years with no salvage value.

3.   Eubank depreciates similar machinery it owns on the sum-of-the-yearsAc€?c-digits basis.

4.   The lessee pays all executory costs.

5.   EubankAc€?cs incremental borrowing rate is 10% per year. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease payments (present value factor for 4 periods at 8%, 3.57710; at 10%, 3.48685.

Instructions

(a)    Indicate the type of lease Eubank Company has entered into and what accounting treatment is applicable.

(b)    Prepare the journal entries on EubankAc€?cs books that relate to the lease agreement for the following dates: (Round all amounts to the nearest dollar. Include a partial amortization schedule.)

1.    July 1, 2014.   

   2.    December 31, 2014.

3.    July 1, 2015.

4.    December 31, 2015.

Answers

Maurice Tutor
(5)
Status NEW Posted 18 Aug 2017 04:08 PM My Price 11.00

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