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Prepare journal entry relevant to year for hhh construction

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Reference no: EM132973422

Hogan's Halloween House (HHH) began a lease on December 31, 2020, with Carlo's Clowm Corp (CCC), a company that manufactures novelty products. HHHplans to lease a machine from CCC that produces fake spiders and snakes that will be used for their safari adventures.

The terms of the lease are as follows:

  • The term of the non-cancelable lease is 10 years with no renewal or bargain purchase option. The remaining economic life of the machine is 12 years and it is expected to have a $20,000 residual value at the end of the lease term though HHHis NOT guaranteeing the residual.
  • The fair value of the machine was $525,176 at the commencement of the lease.
  • Annual payments are required to be made on December 31, starting in 2020.
  • HHH depreciates similar assets using straight line depreciation.
  • HHH's borrowing rate is 8% per year and the lessor's rate implicit in the lease is not known.

Problem 1: Prepare any journal entries relevant to the year 2020 for HHH. Construction, Inc has a calendar fiscal year.

Reference no: EM132973422

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