Wildhorse Steel Company As Lessee Signed A Lease Agreement For Equipment For 5 Years Beginning December 31 2020 Ann 1 (66.5 KiB) Viewed 35 times
Wildhorse Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $55,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Wildhorse's incremental borrowing rate is 8%. Wildhorse is unaware of the rate being used by the lessor. At the end of the lease, Wildhorse has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Wildhorse uses the straight-line method of depreciation on similar owned equipment Click here to view factor tables. (a) Prepare the journal entries, that Wildhorse should record on December 31, 2020. (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 for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to decimal places, e.g. 58,971.) Date Account Titles and Explanation Debit Credit December 31, 2020 (To record leased asset and related liability.) (To record the first rental payment.) eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (b) Prepare the journal entries, that Wildhorse should record on December 31, 2021. (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 for the amounts.) Account Titles and Explanation Debit Credit Date December 31, 2021 (To record amortization.) (To record annual payment on lease liability.)
(c) Prepare the journal entries, that Wildhorse should record on December 31, 2022. (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 for the amounts. Round answers to decimal places eg. 58,971.) Date Account Titles and Explanation Debit Credit December 31, 2022 (To record annual amortization on leased assets.) (To record annual payment on lease liability.) eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (d) What amounts would appear on Wildhorse's December 31, 2022, balance sheet relative to the lease arrangement? (Round answers to decimal places, eg. 58,971.) WILDHORSE STEEL COMPANY Balance Sheet Assets $ Liabilities $ $
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