eal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years. 2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31 and that neither company uses reversing entries.) (d) Prepare the journal entries Flint would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit choose a transaction date enter an account title to record the lease enter a debit amount enter a credit amount enter an account title to record the lease enter a debit amount enter a credit amount (To record the lease.) enter an account title to record lease payment enter a debit amount enter a credit amount enter an account title to record lease payment enter a debit amount enter a credit amount (To record lease payment.) choose a transaction date enter an account title to record amortization enter a debit amount enter a credit amount enter an account title to record amortization enter a debit amount enter a credit amount (To record amortization.) enter an account title to record interest enter a debit amount enter a credit amount enter an account title to record interest enter a debit amount enter a credit amount (To record interest.) choose a transaction date enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount choose a transaction date enter an account title to record amortization enter a debit amount enter a credit amount enter an account title to record amortization enter a debit amount enter a credit amount (To record amortization.) enter an account title to record interest enter a debit amount enter a credit amount enter an account title to record interest enter a debit amount enter a credit amount (To record interest.) eTextbook and Media List of Accounts Save for Later Attempts: 0 of 3 used Submit Answer (e) The parts of this question must be completed in order. This part will be available when you complete the part above. (f)

eal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years. 2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31 and that neither company uses reversing entries.) (d) Prepare the journal entries Flint would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit choose a transaction date enter an account title to record the lease enter a debit amount enter a credit amount enter an account title to record the lease enter a debit amount enter a credit amount (To record the lease.) enter an account title to record lease payment enter a debit amount enter a credit amount enter an account title to record lease payment enter a debit amount enter a credit amount (To record lease payment.) choose a transaction date enter an account title to record amortization enter a debit amount enter a credit amount enter an account title to record amortization enter a debit amount enter a credit amount (To record amortization.) enter an account title to record interest enter a debit amount enter a credit amount enter an account title to record interest enter a debit amount enter a credit amount (To record interest.) choose a transaction date enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount choose a transaction date enter an account title to record amortization enter a debit amount enter a credit amount enter an account title to record amortization enter a debit amount enter a credit amount (To record amortization.) enter an account title to record interest enter a debit amount enter a credit amount enter an account title to record interest enter a debit amount enter a credit amount (To record interest.) eTextbook and Media List of Accounts Save for Later Attempts: 0 of 3 used Submit Answer (e) The parts of this question must be completed in order. This part will be available when you complete the part above. (f)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...

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(d)

Prepare the journal entries Flint would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
choose a transaction date	enter an account title to record the lease	enter a debit amount	enter a credit amount
	enter an account title to record the lease	enter a debit amount	enter a credit amount
	(To record the lease.)
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	(To record lease payment.)
choose a transaction date	enter an account title to record amortization	enter a debit amount	enter a credit amount
	enter an account title to record amortization	enter a debit amount	enter a credit amount
	(To record amortization.)
	enter an account title to record interest	enter a debit amount	enter a credit amount
	enter an account title to record interest	enter a debit amount	enter a credit amount
	(To record interest.)
choose a transaction date	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
choose a transaction date	enter an account title to record amortization	enter a debit amount	enter a credit amount
	enter an account title to record amortization	enter a debit amount	enter a credit amount
	(To record amortization.)
	enter an account title to record interest	enter a debit amount	enter a credit amount
	enter an account title to record interest	enter a debit amount	enter a credit amount
	(To record interest.)

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1.		The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.
2.		The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.