On December 31, 2016, Metlock Corporation signed a 5-year, non-cancelable lease

Question

On December 31, 2016, Metlock Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Metlock to make annual payments of $8,176 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $5,000 unquaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Metlock uses the straight-line method of depreciation for all of its plant assets. Metlock's incremental borrowing rate is 8%, and the lessor's implicit rate is unknown. ? (a) ?Your answer is correct. What type of lease is this? This is a/an finance This is a/anlease SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT Attempts: 1 of 5 used ? (b) [ Your answer is correct. Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.) Present value of the lease 35256 payments

Explanation / Answer

Journal Entries :-

Date Particulars Debit($) Credit($) Dec. 31, 2016 Leased Equipment A/c Dr. 35256 To Lease Liability A/c 35256 Dec. 31, 2016 Lease Liability A/c Dr. 8176 To Cash A/c 8176 Dec. 30, 2017 Depreciation Expenses A/c Dr. ($35256 / 5) 7051 To Accumulated Depreciation A/c 7051 Dec. 31, 2017 Lease Liability A/c Dr. 6010 Interest Expense A/c Dr. (($35256-$8176)*8%) 2166 To Cash A/c 8176

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.