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Prepare journal entries that riley would record

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Reference no: EM133179415

Question - Frost Industries leases a piece of equipment from Riley Corp. on January 1, 2017, with the first payment made at the inception of the lease. The equipment is not of a specialized nature. The following facts apply to the lease:

The lease agreement is non-cancelable with a term of 5 years.

As of January 1, 2017, the equipment had a fair value of $100,000.

Riley purchased the equipment for $100,000.

Riley depreciates all equipment using the double-declining-balance method

The equipment has an estimated economic life of 8 years.

The residual value of the equipment (unguaranteed) at the end of the lease is $15,000.

The lease does not contain a renewal option, and the equipment reverts to Riley Corp. at the end of the lease.

Riley's implicit interest rate is 7% and is known by Frost.

Required - Prepare journal entries that Riley would record during 2017 related to this lease and the leased asset.

Reference no: EM133179415

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