Homework SourseChapter 15 Lease Spiceland Intermediate Accounting Travis Co
Chapter 15 Lease (Spiceland, Intermediate Accounting)
Travis Company leased equipment from Bobby, Inc. on January 1, 2017. Bobby purchased the equipment at a cost of $222,664.
Other information:
Lease Term 3 years
Annual Payments $80,000 on January 1 each year
Life of asset 3 years
Fair value of asset $222,664
Implicit interest rate 8%
Incremental rate 8%
There is no expected residual value
Prepare appropriate journal entries for Bobby, Inc for 2017. Assume a December 31 year-end.
Solution
SOLUTION:
| Debit | Credit | ||
| 01-Jan-17 | Lease receivable | 222,664 | |
| Equipment inventory | 222,664 | ||
| Cash | 80,000 | ||
| Lease receivable | 80,000 | ||
| 31-Dec-17 | Interest receiveable | 11,413 | |
| Interest revenue | 11,413 | ||
| (222664 - 80,000) * 8% |
