Prepare cook company journal entries related to the lease

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Reference no: EM131256772

On January 1, 2016, Cook Textiles leased a building with two acres of land from Peck Development. The lease is for 10 years at which time Cook has an option to purchase the property for $130,000. The building has an estimated life of 20 years with a residual value of $156,000. The lease calls for Cook to assume all costs of ownership and to make annual payments of $260,000 due at the beginning of each year. On January 1, 2016, the estimated value of the land was $460,000. Cook uses the straight-line method of depreciation and pays 8% interest on borrowed money. Peck's implicit rate is unknown. 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:

Prepare Cook Company's journal entries related to the lease in 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the lease.

Record the cash payment.

Record the depreciation expense.

Record accrued interest.

Reference no: EM131256772

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