Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000. Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Account name Debit Credit ENTER DATE 1- 2- 3- 4- (To record the lease) ENTER DATE 1- 2- (To record receipt of lease payment) ENTER DATE 1- 2- 3-

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 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...

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Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.

Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.)

Click here to view factor tables.

Date

Account Titles and Account name

Debit

Credit

ENTER DATE

(To record the lease)

ENTER DATE

(To record receipt of lease payment)

ENTER DATE

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