Prepare the journal entries on the lessee books to reflect

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Reference no: EM132964321

The following facts pertain to a non-cancelable lease agreement between Carmichael Leasing Company and Banket Company, a lessee:

Commencement date May 1, 2020

Annual lease payment due at the beginning of each year, beginning with June 1, 2020, $ 15349.90
Bargain purchase option price at end of lease term $ 6000
Lease term 5 years
The economic life of leased equipment 10 years
Lessor's cost $65,000
The fair value of the asset at June 1, 2020, $76,000
Lessor's implicit rate 4%
Lessee's incremental borrowing rate 4%
The collectibility of the lease payments by Carmichael is probable.

Instructions

Problem 1: Prepare a lease amortization schedule for Banket for the 5-year lease term.

Problem 2: Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Blanket's annual accounting ends on December 31. Reversing entries are used by Banket

Reference no: EM132964321

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