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Prepare all the necessary journal entries for ennier

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Reference no: EM131756306

Question: Ennier Corp. leases its production equipment from Trusting Finance Corporation. Both companies use ASPE. the lease has the following terms:

1. Ehe lease is dated May 30, 2014, with a lease term of eight years. It is non-cancellable and requires equal rental payments of $30,000 due each May 30, beginning in 2014.

2. The equipment has an estimated economic life of 10 years.

3. The lease contains no renewal options and the equipment reverts to Trusting Finance on termination of the lease. At the end of the lease term, the equipment is expected to have a residual value (which is guaranteed by Ennier) of $23,000.

4. Ennier's incremental borrowing rate is 6% per year. the implicit rate is 5% which is known to Ennier.

5. Ennier uses straight-line depreciation for similar production equipment that it owns.

6. Collectability of the payments is reasonably predictable and there are no important uncertainties about costs that have not yet been incurred by the lessor.

7. Both companies' year-ends are December 31.

Required: (Round final answers to the nearest whole number)

a. Using the data above, analyze and discuss the classification of this lease for the lessee and the lessor.

b. Prepare all the necessary journal entries for Ennier for 2014.

c. Prepare all the necessary journal entries for Trusting Finance for 2014.

d. Prepare a partial classified balance sheet for Ennier for 2014 to reflect the presentation of all lease-related accounts.

Reference no: EM131756306

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