On January 1, 2025, a machine was purchased for $1,040,000 by Metlock Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ (b) eTextbook and Media List of Accounts Date 130,000 Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Account Titles and Explanation (To record the lease) Attempts: 1 of 4 used Debit Credit
On January 1, 2025, a machine was purchased for $1,040,000 by Metlock Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ (b) eTextbook and Media List of Accounts Date 130,000 Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Account Titles and Explanation (To record the lease) Attempts: 1 of 4 used Debit Credit
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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Transcribed Image Text:On January 1, 2025, a machine was purchased for $1,040,000 by Metlock Co. The machine is expected to have an 8-year life with no
salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2025,
with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a
residual value at the end of the lease term of $562,500, though this amount is unguaranteed.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
(a)
Your answer is correct.
How much should Metlock report as income before income tax on this lease for 2025?
Income before income tax $
(b)
eTextbook and Media
List of Accounts
Date
130,000
Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the
rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Account Titles and Explanation
(To record the lease)
Attempts: 1 of 4 used
Debit
Credit
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