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Multiple Choice Question 87 On January 2, 2018, Blossom Leasing Company leases equipment to Brick Co....

Multiple Choice Question 87

On January 2, 2018, Blossom Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $158000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $98000 residual value of the asset at the end of the lease term. Brick’s incremental borrowing rate is 10%, however it knows that Blossom’s implicit interest rate is 8%. What journal entry would Brick Co. make at January 1, 2019 to record the second lease payment?

PV Annuity Due

PV Ordinary Annuity

PV Single Sum
8%, 5 periods

4.31213

3.99271

0.68058
10%, 5 periods

4.16987

3.79079

0.62092
Lease Liability 111267
Interest Payable 46733
        Cash 158000
Lease Liability 110799
Interest Payable 47201
        Cash 158000
Lease Liability 158000
        Cash 158000
Lease Liability 98999
Interest Payable 59001
        Cash 158000
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