Martinez Incorporated leases a piece of equipment to Tamarisk Corporation on January 1, 2017. The lease agreement called for annual rental payments...
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Martinez Incorporated leases a piece of equipment to Tamarisk Corporation on January 1, 2017. The lease agreement called for annual rental payments of $4,970 at the
beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,900, a book value of $20,900, and both parties
expect a residual value of $8,350 at the end of the lease term, though this amount is not guaranteed. Martinez set the lease payments with the intent of earning a 4%
return, and Tamarisk is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

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Determine the nature of the lease to both Martinez and Tamarisk.
The lease is a/an
lease to Martinez.
The lease is a/an
lease to Tamarisk.

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Prepare the lease amortization schedule(s) for Tamarisk for all 4 years of the lease. (Round answers to 0 decimal places, e.g. 5,175.) TAMARISK CORPORATION
Lease Amortization Schedule Annuity-Due Basis Reductinn of
Date Annual Payment Interest on Liability Lease Liability Lease Liability 1/1/17 $ $ $ $
1/1/17
1/1/18
1/1/19 1/1/20

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Lease Expense Schedule
Lease Expense
Interest on
Amortization of Carrying Value of
Date
(Straight-Line) Lease Liability
ROU Asset
ROU Asset
1/1/17
$
12/31/17
12/31/18
12/31/19
12/31/20

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Prepare the journal entries for Tamarisk for 2017 and 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent
manually.)
Date Account Titles and Explanation
Debit
Credit
1/1/17
(To record the lease)
1/1/17
(To record lease liability)
12/31/17
1/1/18

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Suppose Tamarisk incurs initial direct costs of $700 related to the lease. Prepare the journal entries for 2017. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually.)
Date Account Titles and Explanation
Debit
Credit
1/1/17
(To record the lease)
1/1/17
(To record lease liability)
12/31/17

Top Answer

The lease is a/an operating lease to Martinez. The lease is a/an operating lease to Tamarisk. ENTRIES: 1/1/17 Dr.... View the full answer

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LEASE AMORTIZATION SCHEDULE
Reduction of
Date
Annual
Lease
Payment
Interest
Lease
Liability
Liability
1/1/17
$
18,762.00
1/1/17
$
4,970.00
4,970.00
$
13,792.00
1/1/18
$
4,970.00
552.00
4,418.00...

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