Solve_ch21 - treatment is applicable. (b) Prepare the...

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Name: __________________________ Problem chapter 21 1. Lessee accounting—capital lease. Horton Company, as lessee, enters into a lease agreement on July 1, 2010, for equipment. The following data are relevant to the lease agreement: 1. The term of the noncancelable lease is 5 years, with no renewal option. Payments of $125,000 are due on July 1 of each year. 2. The fair value of the equipment on July 1, 2010 is $539,016. The equipment has an economic life of 6 years with no salvage value. 3. Horton depreciates similar machinery it owns on the straight line basis. 4. The lessee pays all executory costs. 5. Horton's incremental borrowing rate is 9% per year. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease payments. Chapter 6 has the pv tables if needed. Instructions (a) Indicate the type of lease Horton Company has entered into and what accounting
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Unformatted text preview: treatment is applicable. (b) Prepare the journal entries on Horton's 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, 2010. 2. December 31, 2010. 3. July 1, 2011. 4. December 31, 2011. 7/1/2010 539016 7/1/2010 125000 125000 414016 7/1/2011 125000 33121 91879 322137 7/1/2012 125000 25771 99229 222908 7/1/2010 Leased Equipment 539016 Cash 125000 Lease liability 414016 12/1/2010 Dep. Exp 53901.6 Accum. Dep. 53901.6 Interest Exp. 16560.5 Interest Payable 16560.5 7/1/2011 Interest Exp. 16560.5 Interest Payable 16560.5 Lease liability 91879 Interest payable 33121 Cash 125000 12/1/2011 Dep. Exp 107803 Page 1 Accum. Dep 107803 Interest Exp. 12885.5 Interest Payable 12885.5...
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Solve_ch21 - treatment is applicable. (b) Prepare the...

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