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Homework answers / question archive / View Policies Current Attempt in Progress Cheyenne Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc
View Policies Current Attempt in Progress Cheyenne Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The lease calls for annual lease payments of $22,000 at the beginning of each year. The lease does not transfer ownership contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Packers, Inc., the lessor the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $172,000. Prepare Packers 2020 journal entries, assuming the company uses straight line depreciation and no salvage value. (Credit occount titles are automatically indented when the amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit (To record the recognition of the revenue each period) (To record depreciation expense on the leased equipment)
Solution:
| Journal Entries - Packers Inc. | |||
| Date | Particulars | Debit | Credit |
| 1-Jan-20 | Cash Dr | $22,000 | |
| To Deferred rent revenue | $22,000 | ||
| (To record rent received in advance) | |||
| 31-Dec-20 | Deferred rent revenue Dr | $22,000 | |
| To Rent revenue | $22,000 | ||
| (To record rent revenue) | |||
| 31-Dec-20 | Depreciation expense Dr ($172,000/10) | $17,200.00 | |
| To Accumulated Depreciation - Equipment | $17,200.00 | ||
| (To record depreciation expense) |
