Problem
Lease Guaranteed Salvage Value
On January M Company signs a year noncancelable lease agreement to lease a machine to B
Company. The following data pertain to this agreement.
Payments of $ are due on Dec. of each year. First payment in advance is paid on Jan.
b The fair value and the cost of the machine to C Company on Jan is $
c and company use the straightline method to depreciate equipment.
d Bs implicit rate is and the salvage value is $ and is guaranteed by lessee.
Instructions
Is this a capital lease or operating lease? Show results for each of capitalization tests.
Instructions: Prepare journal entries on the books of the lessee through and
The accounting period of ends on December
