Question

On Januray 1, 2017, Sony Corporation sold machine to Speedy Finance for $140,000 and immediately leased it back.The machine was carried Sony's books at $112,000. The term of the lease is 3 years, there is no bargain purchase option, and title dose not tranfer to Sony at lease-end. The lease requires three equal payment of $34, 784 at the end of each year( first payment on January 1, 2018) The appropriate rate of interest is 6%. The machine has a useful life of 5 years and the residual value at the end of the lease term is expected to be $56,000, and none of which is guranteed.
?Prepare Sony journal entries to Speedy Finance 2017 jounal entries

?1/1/2017
?12/31/2017
?1/1/2018
?
Please help me. Thank you!

Answer 1

Explaination: leasing period is less than the life of asset, It means it is a Operating Lease.

1.1.2017 speedy finance a/c Dr 140000

To machine a/c 112000

To Gain on sale a/c 28000

( Being assets sold )

12.31.2017 lease rentals a/c Dr 34784

To speedy finance a/c 34784

( Being lease rentals charged )

12.31.2017 Gain on sale a/c Dr 28000

To Profit & loss a/c 28000

( Being gain transfered to P&L a/c )

12.31.2017 Profit & loss a/c Dr 34784

To lease rentals 34784

( Being lease rentals charged to P&L a/c )

1.1.2018 speedy finane a/c Dr 34784

To Bank a/c 34784   

( Being rent paid )