Reference no: EM132655777
Question - Lessor CBA Inc, leased a machine to lessee DF Co. The Lease is non-cancelable and requires DF to pay $6,000 per year, payable in advance, over a four-year period. CBA's implicit interest rate (known to DF) is 6%. The lease term begins on January 1, 2020. The machine's economic life is 7 years. The machine's book value is $26,000 and fair value $30,000, with a guaranteed residual value of $10,000. The collectability of the lease payments is probable for the lessor.
Note:
Present Value of an annuity of 1 for 4 periods at 6% is 3.46511,
Present Value of an annuity due of 1 for 4 periods at 6% is 3.67301.
Present Value of 1 of 4 periods at 6% is 0.79209)
Required -
1. Provide the journal entries required on the lessee's books through January 1, 2020?
2. Provide the journal entries required on the Lessor books through January 1, 2020?
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