Use the following information for Problems #Based on E:
Lessee Entries, Capital Lease with Unguaranteed Residual Value: On January Adams Corporation signed a year noncancelable lease for a machine. The terms of the lease called for Adams to make annual payments of $ at the beginning of each year, starting January The machine has an estimated useful life of years and a $ unguaranteed residual value. The machine reverts back to the Lessor at the end of the lease term.
Adams uses the straightline method of depreciation for all of its plant assets. Adams's incremental borrowing rate is and the lessor's implicit rate is unknown.
Compute the present value of the Minimum Lease Payments Note: Use PV of annuity due
Prepare all necessary journal entries for Adams for this lease for year Use the template below:
Debit
Credit
Jan
tableLeased Equipment,,Lease Liability,,
tableLease Liability,,Cash
Dec
tableInterest Expense,,Interest Payable,,
tableDepreciation Expense,,Accumulated Depreciation,,
