(This Problem Requires Use of Present Value Tables.)

(This problem requires use of present value tables.)
Raleigh, Inc. leased some equipment from another company on January 1, 2014, for a three-year period. Payments of $45,000 were due each December 31. The lease qualified as a capital lease. Assets were depreciated over the life of the lease, using the straight-line method. The appropriate interest rate to use was 9%.
Required:
(For all answers, round to the nearest dollar.)
a.Prepare all December 31, 2014, journal entries required on Raleigh's books.
b.At December 31, 2014, how much of the lease liability should be shown as current? Compute two acceptable answers.
c.If the first $45,000 payment were due January 1, 2014, what journal entries would be required on Raleigh's books on January 1, 2014?
d.Assume again that the $45,000 payments are made on December 31. Assume, in addition, that at the end of three years, the lessee guaranteed a residual value of $10,000. Compute the amount of the lease obligation that should be recorded on January 1, 2014.
e.Refer to Part d. Assume that on December 31, 2016, the leased equipment had a fair value of only $6,500. Prepare all December 31, 2016, journal entries for the lessee.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free