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On January 1, Year 1, Robin Corp. signs a contract to lease non-specialized manufacturing equipment from Owl, Inc. Robin agrees to make lease payments of $36,000 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is four years. Payments are due every December 31, beginning December 31, Year 1. Owl expects to collect all lease payments. 2. The fair value of the manufacturing equipment on January 1, Year 1, is $150,000. The equipment has an economic life of seven years. 3. The equipment has an estimated residual value of $15,000 at the end of the lease term. This amount is not guaranteed by Robin. 4. Both Robin and Owl depreciate similar assets using the straight-line method. 5. Robin's incremental borrowing rate is 8% per year; Owl's implicit interest rate is 6% and is known by Robin. 6. Robin pays $1,100 per year for maintenance of the equipment directly to an applicable third party. 7. Assume that this is an operating lease and prepare journal entries for Owl (the lessor) for the entire lease. Round your answers to the nearest cent and use the rounded answer for the subsequent calculations. Year 1 Jan. 1 150,000 150,000 Right-of-Use Asset Lease Liability Dec. 31 Lease Liability 141,000 Cash 141,000 Dec. 31 Interest Revenue 846 Lease Liability 132,540 Year 2 Dec. 31 Dec. 31

On January 1, Year 1, Robin Corp. signs a contract to lease non-specialized manufacturing equipment from Owl, Inc. Robin agrees to make lease payments of $36,000 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is four years. Payments are due every December 31, beginning December 31, Year 1. Owl expects to collect all lease payments. 2. The fair value of the manufacturing equipment on January 1, Year 1, is $150,000. The equipment has an economic life of seven years. 3. The equipment has an estimated residual value of $15,000 at the end of the lease term. This amount is not guaranteed by Robin. 4. Both Robin and Owl depreciate similar assets using the straight-line method. 5. Robin's incremental borrowing rate is 8% per year; Owl's implicit interest rate is 6% and is known by Robin. 6. Robin pays $1,100 per year for maintenance of the equipment directly to an applicable third party. 7. Assume that this is an operating lease and prepare journal entries for Owl (the lessor) for the entire lease. Round your answers to the nearest cent and use the rounded answer for the subsequent calculations. Year 1 Jan. 1 150,000 150,000 Right-of-Use Asset Lease Liability Dec. 31 Lease Liability 141,000 Cash 141,000 Dec. 31 Interest Revenue 846 Lease Liability 132,540 Year 2 Dec. 31 Dec. 31

Intermediate Accounting: Reporting And Analysis
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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
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On January 1, Year 1, Robin Corp. signs a contract to lease non-specialized manufacturing equipment from Owl, Inc. Robin agrees to make lease payments of $36,000 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is four years. Payments are due every December 31, beginning December 31, Year 1. Owl expects to collect all lease payments. 2. The fair value of the manufacturing equipment on January 1, Year 1, is $150,000. The equipment has an economic life of seven years. 3. The equipment has an estimated residual value of $15,000 at the end of the lease term. This amount is not guaranteed by Robin. 4. Both Robin and Owl depreciate similar assets using the straight-line method. 5. Robin's incremental borrowing rate is 8% per year; Owl's implicit interest rate is 6% and is known by Robin. 6. Robin pays $1,100 per year for maintenance of the equipment directly to an applicable third party. 7. Assume that this is an operating lease and prepare journal entries for Owl (the lessor) for the entire lease. Round your answers to the nearest cent and use the rounded answer for the subsequent calculations. Year 1 Jan. 1 150,000 150,000 Right-of-Use Asset Lease Liability Dec. 31 Lease Liability 141,000 Cash 141,000 Dec. 31 Interest Revenue 846 Lease Liability 132,540 Year 2 Dec. 31 Dec. 31
Transcribed Image Text:On January 1, Year 1, Robin Corp. signs a contract to lease non-specialized manufacturing equipment from Owl, Inc. Robin agrees to make lease payments of $36,000 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is four years. Payments are due every December 31, beginning December 31, Year 1. Owl expects to collect all lease payments. 2. The fair value of the manufacturing equipment on January 1, Year 1, is $150,000. The equipment has an economic life of seven years. 3. The equipment has an estimated residual value of $15,000 at the end of the lease term. This amount is not guaranteed by Robin. 4. Both Robin and Owl depreciate similar assets using the straight-line method. 5. Robin's incremental borrowing rate is 8% per year; Owl's implicit interest rate is 6% and is known by Robin. 6. Robin pays $1,100 per year for maintenance of the equipment directly to an applicable third party. 7. Assume that this is an operating lease and prepare journal entries for Owl (the lessor) for the entire lease. Round your answers to the nearest cent and use the rounded answer for the subsequent calculations. Year 1 Jan. 1 150,000 150,000 Right-of-Use Asset Lease Liability Dec. 31 Lease Liability 141,000 Cash 141,000 Dec. 31 Interest Revenue 846 Lease Liability 132,540 Year 2 Dec. 31 Dec. 31
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