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Cullumber Leasing Company agrees to lease equipment to Riverbed Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2025, is $737,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Riverbed estimates that the expected residual value at the end of the lease term will be $60,000. Riverbed amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Cullumber desires a 10% rate of return on its investments. Riverbed's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Prepare the journal entries Riverbed would make in 2025 and 2026 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Date 1/1/25 1/1/25 12/31/25 12/31/25 Account Titles and Explanation Leased Equipment Lease Liability (To record the lease.) Lease Liability Cash (To record lease payment.) Depreciation Expense Accumulated Depreciation-Leased Equipment (To record amortization.) (To record interest.) (To record amortization.) Debit 689763 131872 Credit 6897 1318

Cullumber Leasing Company agrees to lease equipment to Riverbed Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2025, is $737,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Riverbed estimates that the expected residual value at the end of the lease term will be $60,000. Riverbed amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Cullumber desires a 10% rate of return on its investments. Riverbed's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Prepare the journal entries Riverbed would make in 2025 and 2026 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Date 1/1/25 1/1/25 12/31/25 12/31/25 Account Titles and Explanation Leased Equipment Lease Liability (To record the lease.) Lease Liability Cash (To record lease payment.) Depreciation Expense Accumulated Depreciation-Leased Equipment (To record amortization.) (To record interest.) (To record amortization.) Debit 689763 131872 Credit 6897 1318

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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Cullumber Leasing Company agrees to lease equipment to Riverbed Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2025, is $737,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Riverbed estimates that the expected residual value at the end of the lease term will be $60,000. Riverbed amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Cullumber desires a 10% rate of return on its investments. Riverbed's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Prepare the journal entries Riverbed would make in 2025 and 2026 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Date 1/1/25 1/1/25 12/31/25 V 12/31/25 Account Titles and Explanation Leased Equipment Lease Liability (To record the lease.) Lease Liability Cash (To record lease payment.) Depreciation Expense Accumulated Depreciation-Leased Equipment (To record amortization.) (To record interest.) (To record amortization.) (To record interest.) Debit 689763 131872 Credit 6897 1318
Transcribed Image Text:Cullumber Leasing Company agrees to lease equipment to Riverbed Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2025, is $737,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Riverbed estimates that the expected residual value at the end of the lease term will be $60,000. Riverbed amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Cullumber desires a 10% rate of return on its investments. Riverbed's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Prepare the journal entries Riverbed would make in 2025 and 2026 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Date 1/1/25 1/1/25 12/31/25 V 12/31/25 Account Titles and Explanation Leased Equipment Lease Liability (To record the lease.) Lease Liability Cash (To record lease payment.) Depreciation Expense Accumulated Depreciation-Leased Equipment (To record amortization.) (To record interest.) (To record amortization.) (To record interest.) Debit 689763 131872 Credit 6897 1318
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