AC 302 WEEK 6 Exercise 21 Question 1

AC 302 WEEK 6 Exercise 21 Question 1
On January 1 2014 Burke Corporation signed a 5year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $9,938 at the beginning of each year, starting January 1, 2014. The machine has an estimated useful life of 6 years and a $5,220 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke- incremental borrowing rate is 10%, and the lessor- implicit rate is unknown.

 	 
Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
The present value of the minimum lease payments		$  




Show List of Accounts
Show Solution
Show Answer

Link to Text

 	 
 	Your answer is correct. 
 	 
Prepare all necessary journal entries for Burke for this lease through January 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 58,971.)
Date	Account Titles and Explanation	Debit	Credit
1/1/14	  
  

	(To record the lease.)	
  
  

	(To record first payment.)		
12/31/14	 
	(To record depreciation.)		
	    

	(To record interest.)		
1/1/15	  


	(To record second payament.)