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Case study-charles corporation

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Reference no: EM133205448

Charles Corporation entered into a lease agreement on January 1, 2020 to provide Addison Company with a Niece of machinery. The terms of the lease agreement were as follows.

  1. The lease is to be for 3 years with rental payment of $972,293 to be made at the beginning of each year,
  2. The machinery has a fair value and cost of S6,400,000 and an economic life of 8 years.
  3. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not a specialized nature.
  4. The implicit rate is 6%, which is known by Addison.

Collectability of the payments is probable.

  1. What type of lease is this for the Lessor - Charles?
  2. What type of lease is this for the Lessee - Addison?
  3. Prepare the 2020 Journal Entries for Addison Corporation 

Reference no: EM133205448

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