Indiana Jones Corporation enters into a 6-year lease of equipment on January 1,
ID: 2468057 • Letter: I
Question
Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2014, which requires 6 annual payments of $36,170 each, beginning January 1, 2014. In addition, Indiana Jones guarantees the lesser a residual value of $19,320 at lease-end. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the equipment is $180,180. Prepare Lost Ark's January 1, 2014, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)Explanation / Answer
Jan1 2014
Lease receivable account debit $180,180
To machinery $180,180
(For machine leased to lesse and the carrying value of machine is $180,180)
Cash account debit $36,170
To lease receivable $36,170
(For first lease payment received)