Prepare the required journal entries for the lessee

Assignment Help Financial Accounting

Reference no: EM133497264

Case: On July 1^st, 20X4, the Yuki Corporation, a manufacturer and distributor of DVD recorders, entered a lease with Zion Rental Inc. Yuki agreed to lease 20 DVDs for a period of six years beginning July 1^st, 20X4. Other lease terms as follows:

Annual Lease Payments beginning 01/07/X4 ..............	$ 2,003
Manufacturing Cost of each DVD ................................	300
Normal Selling Price of each DVD ..............................	525
Estimated economic (EUL) for the DVD's ...................	9 years
Implicit rate in the lease (not known by Zion) Estimated Residual Value of each DVD at the end of the lease term	10.0 %
(not guaranteed by Zion) ...............................	$ 80

Zion can borrow at 12.0 percent and agrees to assume full responsibility for all repairs and maintenance of the machines. Zion will return the DVDs to Yuki. Since Zion is a good credit risk, Yuki is certain to collect the lease payments and will not incur any additional costs after the date of the lease agreement.

Both Companies follow ASPE

Required:

Determine how Yuki, the lessor, and Zion, the lessee, should classify the lease.
Make all required journal entries for the Lessee on July 1^st, 20X4.
Prepare the required journal entries for the Lessee on December 31^st, 20X4 (assuming a December 31^st Fiscal Year End).
Prepare the required journal entries for the Lessee on July 1^st, 20X5
Prepare the required journal entries for the Lessee on December 31^st, 20X5 (assuming a December 31^st Fiscal Year End).
Assume that when the DVD's are returned to Yuki at the end of the lease term, the residual value of each DVD is only $70. Prepare the journal entry to record the return of the machines by Zion.
How would you solve questions above. Detailed step by step instructions

Reference no: EM133497264

Questions Cloud

How has internet changed landscape of coverage of crime : For instance, how has the Internet changed the landscape of the coverage of crime news? Has anything gotten better? Has anything gotten worse?

Describe an example of an action that the group has taken : Provide a description of the group's motivation, goals, and membership. Describe an example of an action that the group has taken that would meet the definition

What solutions do you have for the company to help them : What solutions do you have for the company to help them have enough cash for operations?

What methods of attacks has the group conducted : Who organized the group? What is the group's purpose or objective? What methods of attacks has the group conducted? Who or what was the group's target?

Prepare the required journal entries for the lessee : Prepare the required journal entries for the Lessee on December 31st, 20X4 (assuming a December 31st Fiscal Year End).

What ways do you believe that the criminal justice system : what ways do you believe that the criminal justice system can ensure fair and equal treatment for all? Based on your thoughts (supported by resources)

Differences between direct-financing and a sales-type lease : What are the 5 classification criteria's? Provide a few examples why a company would choose to lease an asset versus purchasing

Identify the three models of incarceration that have : What types of changes would you make if you were a prison administrator who wanted to attract and keep responsible and capable individuals as correctional

Explain the importance of professionalism in corrections : Explain the importance of professionalism in corrections and list the seven characteristics of a professional attitude.

User Account

All Pages