Required:
1. Prepare the appropriate journal entries for the lessee for the first year.
2. Show how the lessor would disclose this lease on the face of the balance sheet for December 31 of the current year.
What will be an ideal response?
Answer:
1. Journal Entries
January 1
Machinery 150,000
Cash 150,000
June 30
Cash 25,000
Rent Revenue 25,000
December 31
Cash 25,000
Rent Revenue 25,000
Depreciation Expense 30,000
Accumulated Depreciation 30,000
2.
Property Plant and Equipment
Equipment 150,000
less Accumulated Depreciation (30,000)
120,000