Reference no: EM132748976
Question - Marigold Corporation entered into a lease agreement on January 1, 2020, to provide Sunland Company with a piece of machinery. The terms of the lease agreement were as follows.
1. The lease is to be for 3 years with rental payments of $11,580 to be made at the beginning of each year.
2. The machinery has a fair value of $58,000, a book value of $40,000, and an economic life of 8 years.
3. At the end of the lease term, both parties expect the machinery to have a residual value of $30,000, none of which is guaranteed.
4. 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 of a specialized nature.
5. The implicit rate is 5%, which is known by Dawkins.
6. Collectibility of the payments is probable.
Required -
1. Prepare the amortization schedules Sunland will use over the lease term.
2. Prepare the 2020 journal entries for Sunland.
3. Prepare the 2020 journal entries for Marigold.
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