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Prepare the necessary journal entry for united on december

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Reference no: EM132672309

Universal Inc. leased equipment to United Company on January 1, 2021. The leased equipment's book value is $480,000 with no residual value at the end of its useful. The remaining useful life of the leased equipment is 12 years. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $70,000 are due at the beginning of each year beginning January 1, 2021. The present value of an annuity due of $1 at 10% for ten periods is 6.75902. Both companies use the straight-line method in depreciating/amortizing their assets.

Required:

Problem A) Consider this to be a finance lease. Round your answers to the nearest whole dollar amounts.

1. Prepare the necessary journal entries for United (Lessee) on January 1, 2021.
2. Prepare the necessary journal entries for United (lessee) on December 31, 2021, the end of the first reporting period.

Problem B) Consider this to be an operating lease. Round your answers to the nearest whole dollar amounts.

1. Prepare the necessary journal entries for United (lessee) on December 31, 2021, the end of the first reporting period.
2. Prepare the necessary journal entries for Universal (Lessor) on January 1, 2021.
3. Prepare the necessary journal entries for Universal (lessor) on December 31, 2021, the end of the first reporting period.

Reference no: EM132672309

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