Reference no: EM133164615
Question - On January 1, 2020, a machine was purchased for $400,000 by Younger Leasing Co. The machine is expected to have a 10-year life with no salvage value. Similar machines are depreciated on a straight-line basis by Younger. The machine was leased to Juniper Inc. for 3 years on January 1, 2020, with annual rent payments of $69,560 due at the beginning of each year, starting January 1, 2020. The machine is expected to have a residual value at the end of the lease term of $260,000, though this amount is unguaranteed.
Assume an incremental borrowing rate of 8% and an implicit rate of 6%. The present value of a $1 for 3 periods at 6% is 0.83962 and at 8% is 0.79383. The present value of an annuity due for 3 periods at 6% is 2.83339 and at 8% is 2.78326.
Required -
a) Following US GAAP, record all necessary 2020 journal entries in the books of Juniper (the lessee). Please clearly indicate the dates for the journal entries.
b) Following US GAAP, what amounts will Juniper report on the Balance Sheet (any assets and liabilities) and Income Statement (any revenue or expenses) prepared on December 31, 2020, regarding this lease? Please clearly indicate whether the expense reported in Income Statement, if any, is lease expense, interest expense, and/or amortization expense. Also clearly indicate the gross and net amount of assets reported, if any, in the Balance Sheet.
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Record all necessary journal entries in books of juniper
: Following US GAAP, record all necessary 2020 journal entries in the books of Juniper (the lessee). Please clearly indicate the dates for the journal entries
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