Reference no: EM132982814
Question - On January 1, 2020 Rose Company leased a machine to Mark Company. Below is more information:
(1) The fair value of the machine was $157,457. (2) The lease agreement specifics annual rental payment beginning of January 1, 2020.
(3) The lease term is 5 years which is equal to the useful life of the machine.
(4) The rental payments are $ 45,000 each January 1 including executory cost of $6,000 (tax) which is paid directly to third party.
(5) Rose company sets the annual rental to earn a rate of return on its investment of 12% per year.
(6) The lease capitalized amount is $157,457 (present value of total lease payments)
Assume the lease is finance lease.
(i) Record the entries which were made by both lessee and lessor in time of leasing the asset (January 1, 2020).
(ii) Amortization table for the first two years (up to January 1, 2021).
(iii) Record the entries which were made by both lessee and lessor for payment of lease rental on January 1, 2020.
(iv) Record the depreciation entry for lessee and lessor, using straight line.
(v) Record the entry for payment of lease rental on January 1, 2021 by lessee and lessor.
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