Question

Leased a delivery truck to YA right after purchasing it for $40,000 on December 31, 2021. Its retail value is $45,114. The lease agreement specifies annual payments of $11,000, including $1,000 maitenance fee, beginning December 31, and at each December 31 through 2024. The interest rate for determining payments was 10%. At the end of the four year lease term (December 31, 2025), the truck was expected to be worth $15,000. The useful life of the truck is five years with no salvage value. The company uses straight line method. In addition, the guaranteed residual value was $6,000. What is the journal entry/entries?

Answer 1

Answer:

Check the explanation

Explanation:

Date                Account                                       Debit           Credit

Dec 2021 lease receivable                         44,000.00  

unearned maintenance fee                                                  4,000.00

asset (delivery truck)                                                            40,000.00

dec 2022 cash/bank                                     11,000.00  

unearned maintenance fee                                                 1,000.00

lease receivable                                                                 10,000.00

depreciation expense                                   7,822.80  

accumulated depreciation                                                 7,822.80

dec 2023 cash/bank                                   11,000.00  

unearned maintenance fee                                                 1,000.00

lease receivable                                                                10,000.00

depreciation expense                                7,822.80  

accumulated depreciation                                                7,822.80

dec 2024 cash/bank                                 11,000.00  

unearned maintenance fee                                               1,000.00

lease receivable                                                               10,000.00

depreciation expense                                7,822.80  

accumulated depreciation                                               7,822.80

dec 2025 cash/bank                               11,000.00  

unearned maintenance fee                                               1,000.00

lease receivable                                                              10,000.00

depreciation expense                              7,822.80  

accumulated depreciation                                              7,822.80

dec 2025 asset                                           13,822.80  

gain on lease                                                                     13,822.80