Problem
Lessee with Guaranteed Residual Value
On January B Company leased a concrete truck with a fair value of $ from E Company on the following terms.
a Noncancelable lease for years
b Lease payments of $ per year. First payment is made on xx and other payments are made on Dec.
c Estimated residual value is $ and Company guarantees residual value.
d Estimated economic life of the truck is years.
e Bs incremental borrowing rate is a year. Implicit rate is
Required
Page of
Is this a capital lease or operating lease. Why?
Instructions: Prepare journal entries on the books of the lessee through the first two years.
The accounting period of A and B Company ends on December
