Answer:
(To record the lease)
Lease Receivable -------- $92,000 (Debit)
Equipment -------- $18,427 (Credit)
(To record the lease first payment)
Cash -------- $92,000 (Debit)
Lease Receivable -------- $18,427 (Credit)
Explanation:
Given:
Lease Amount (Present Value) = $92,000
Rental Payment = $18,427
Term of Lease = 6 years
Equipment Useful Life = 6 years
Implicit Interest Rate = 8%
To prepare IBM's December 31, 2020, we'll make use of the following entries.
To record the lease itself:
1. Lease Receivable (Debit)
2. Equipment (Credit)
To record the lease first payment:
3. Cash (Debit)
4. Lease Receivable (Credit)
Only the first lease payment is considered because the commencement date of the lease is December 31, 2019; Between December 31, 2020 and December 31, 2019, only one payment (i.e. the first payment) is expected to have been recorded.
The recorded entry is as follows;
(To record the lease)
Lease Receivable -------- $92,000 (Debit)
Equipment -------- $18,427 (Credit)
(To record the lease first payment)
Cash -------- $92,000 (Debit)
Lease Receivable -------- $18,427 (Credit)
