Grouper Corporation leases equipment from Falls Company on
January 1, 2017. The lease agreement does not transfer ownership,
contain a bargain purchase option, and is not a specialized asset.
It covers 3 years of the equipment’s 8-year useful life, and the
present value of the lease payments is less than 90% of the fair
value of the asset leased. The annual lease payment is $36,000 at
the beginning of each year, and Kingston’s incremental borrowing
rate is 8%, which is the same as the lessor’s implicit rate.
Prepare all the necessary journal entries for Falls Company (the lessor) for 2017, assuming the equipment is carried at a cost of $232,000
Prepare all the necessary journal entries for Falls Company (the lessor) for 2017, assuming the equipment is carried at a cost of $232,000 :-
|January 1, 2017||Cash / Bank||$36,000|
|To rent revenue||$36,000|
|December 31, 2017||Rent revenue||$36,000|
|To profit and loss||$36,000|
|( To record revenue transferred to profit and loss )|
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