Exercise 21-1 On January 1, 2017, Whispering Corporation signed a 5-year noncanc
ID: 2593047 • Letter: E
Question
Exercise 21-1 On January 1, 2017, Whispering Corporation signed a 5-year noncancelable lease for a machine. The terms of $8,026 at the beginning of each machine reverts back to the lessor at the end of the lease term. Whispering usest incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. the lease called for Whispering to make annual payments of 6 years and a $4,900 unguaranteed residual value. The year, starting January 1, 2017. The machine has an estimated useful life of t he straight-line method of depreciation for all of its plant assets. Whispering's Campute the present value of the minimum lease payments. (Round present value factor calculations to S decimal places, e.g.1 O decimal places e.g.58,971) The present value of the minimum lease paymentss SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: SIMILAR EXERCISEExplanation / Answer
1) Computation of Present Value of Minimum Lease Payment :-
= $8026 * 4.1698 = $33467
2) Journal Entries :-
Date Particulars Debit ($) Credit ($) 1/1/2017 Leased Equipment 33467 To Lease Liability 33467 1/1/2017 Lease Liability 8026 To Cash 8026 31/12/2017 Depreciation Expense ($33467/5) 6693 To Accumulated Depreciation Capital Leases 6693 31/12/2017 Interest Expense 2544 To Interest Payable (($33467-$8026)*10%) 2544 1/1/2018 Lease Liability 5482 Interest Payable 2544 To Cash 8026Related Questions
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