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Record all appropriate journal entries for Summer Fun Inc

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Reference no: EM132966564

Question - Summer Fun Inc. (lessor) agreed to lease an icecream truck to Icecream Party LLC (lessee) on September 30, 2020. The truck originally cost Summer Fun Inc. $115,000. The lease had a 6-year term and includes an implicit interest rate of 2% (8% annually). Icecream Party was given the option to purchase the truck on September 29, 2024 (4 years after the lease start date) for $28,000 when the fair value was expected to be $36,000. The first lease payment of $4,000 was due on September 30, 2020 and payments are due each quarter (December 31, March 31 and June 30) thereafter. Please answer the following questions.

A) What type of lease is this and why?

B) Record all appropriate journal entries for Summer Fun Inc. (lessor) and Icecream Party LLC (lessee) on September 30, 2020. Please clearly label your entries.

C) Record all appropriate journal entries for Summer Fun Inc. (lessor) and Icecream Party LLC (lessee) on December 31, 2020. Please clearly label your entries.

Reference no: EM132966564

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