On January 1, 20X1, Tucker Company leases equipment from Franz Inc. over the equipment's entire estimated useful life of five years. Franz acquired the asset for $431,213 and normally utilizes an interest rate of 8% for these types of transactions. The annual rental payment is $100,000; the first payment is due on January 1, 20X1. At the commencement of the lease, Tucker should debit

Question

Luke Morrow

Business

12 February, 13:42

On January 1, 20X1, Tucker Company leases equipment from Franz Inc. over the equipment's entire estimated useful life of five years. Franz acquired the asset for $431,213 and normally utilizes an interest rate of 8% for these types of transactions. The annual rental payment is $100,000; the first payment is due on January 1, 20X1. At the commencement of the lease, Tucker should debit

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Ayla Burns · Answer 1

At the commencement of the lease, Tucker should debit

-Debit Lease payable for $100,000

-credit Cash $100,000

Explanation:

The leasing start date is really the date on which land is transferred from the property owner to the occupant. On that day, even the date indicated on the rent is older than the "beginning date," the renter will begin reporting straight-line expenses.

The original date listed on the lease contract does not affect the lease starting date, as does the act ASC 840 and perhaps even the new lease accounting standards.

In this situation, Tucker would pay $100,000 for debit lease and $100,000 for credit currency.