Ask Experts Questions for FREE Help !
Ask
    Jeff_McD18's Avatar
    Jeff_McD18 Posts: 1, Reputation: 1
    New Member
     
    #1

    Oct 29, 2013, 11:34 AM
    Journal Entry Question
    Lai Corporation, which uses ASPE, leased equipment that was carried at a cost of $185,000 to Swander Inc. the lessee. The term of the lease is 7 years, beginning January 1, 2014, with equal rental payments of $36,194 at the beginning of each year. Swander pays all executory costs directly to third parties. The equipment’s fair value at the lease’s inception is $185,000. The equipment has a useful life of 8 years with no residual value. The lease has an implicit interest rate of 12%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Lai.

    Prepare Lai Corporation’s January 1, 2014 journal entries at the inception of the lease.

    We will need an entry to record the inception of the lease as well as an entry to record the first lease payment.
    Fidget1's Avatar
    Fidget1 Posts: 105, Reputation: 4
    Junior Member
     
    #2

    Oct 31, 2013, 12:51 PM
    I'd classify it as a Finance Lease, so if all you're doing is recording the lease inception and first payment then you need to is:

    Dr: Lease Receivable $185,000
    Cr: PPE $185,000


    Then to record the first payment, which happens on the same day as the lease inception, you:

    Dr: Cash $36,194
    Cr: Lease Receivable $36,194

    There's no interest/finance charge to account for at this point - that would happen at the year end.

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Journal Entry Question [ 3 Answers ]

Hello, I'm supposed to create a journal entry for the items below. If anyone could let me know if I've made any errors it would be greatly appreciated. I got my B.A. In psych and this accounting class has been really challenging! -For the fiscal year of 2011 Jan-1 Acquired additional...

Journal entry question [ 1 Answers ]

I need to book a loan payable. It was cash which was spent so I never deposited any money. If I credit loan payable what do I debit? Draw or contribution?

What would the journal entry be for this question? [ 1 Answers ]

In May 2009, management of JJB determined that their assorted chocolate line of business was not profitable and could not compete with Rogers Chocolate and decided to discontinue operations. On Sept 23rd, 2009 JJB sold all assets relating to the Chocolate business and recorded a gain of $69,000...

What would the journal entry for this question be? [ 2 Answers ]

In May 2009, management of JJB determined that their assorted chocolate line of business was not profitable and could not compete with Rogers Chocolate and decided to discontinue operations. On Sept 23rd, 2009 JJB sold all assets relating to the Chocolate business and recorded a gain of $69,000...

Last Journal Entry Question [ 1 Answers ]

Did I do this right? Question: Accepted an advance in cash for artwork to be done for another agency, $1600 My Journal Entry? Debit Cash $1600 Credit Prepaid Artowrk $1600


View more questions Search