Return On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a five-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $429,029 and has an expected economic life of six years. Aqua expects the residual value at December 31, 2021, to be $65,000. Negotiations led to Maywood guaranteeing a $92,500 residual value. Equal payments under the lease are $130,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2018 and December 31, 2018, related to the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Return On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a five-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $429,029 and has an expected economic life of six years. Aqua expects the residual value at December 31, 2021, to be $65,000. Negotiations led to Maywood guaranteeing a $92,500 residual value. Equal payments under the lease are $130,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2018 and December 31, 2018, related to the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
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On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a five-year period ending December 31,
2021, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $429,029 and has an expected
economic life of six years. Aqua expects the residual value at December 31, 2021, to be $65,000. Negotiations led to Maywood
guaranteeing a $92,500 residual value.
Equal payments under the lease are $130,000 and are due on December 31 of each year with the first payment being made on
December 31, 2018. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of
$1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. & 2. Prepare the appropriate entries for Maywood on January 1, 2018 and December 31, 2018, related to the lease. (If no entry is
required for a transaction/event, select "No journal entry required" in the first account field.)
Answer is complete but not entirely correct.
No
Date
General Journal
Debit
Credit
568, 163
January 01, 2018 Right-of-use asset
Lease payable
568, 163 X
2
December 31, 201 Amortization expense
113.633 8
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