At the beginning of current year, Waxxy Company sold a machine and immediately leased back. The following data relate to the sale and leaseback transaction: Sale price at above fair value 6,000,000 Fair value of machine 5,000,000 Carrying amount of machine 4,500,000 Annual rental payable at the end of each year 800,000 Remaining life of machine 10 years Lease term 4 years Implicit interest rate 8% Present value of an ordinary annuity of 1 at 8% for four periods 3.312 There is no transfer of title to the lessee nor purchase option that is reasonably certain to be exercised. Required: 4. Prepare journal entries on the books of seller-lessee for the current year. 5. Prepare journal entries on the books of buyer-lessor for the current year.
At the beginning of current year, Waxxy Company sold a machine and immediately leased back.
The following data relate to the sale and leaseback transaction:
Sale price at above fair value 6,000,000
Fair value of machine 5,000,000
Carrying amount of machine 4,500,000
Annual rental payable at the end of each year 800,000
Remaining life of machine 10 years
Lease term 4 years
Implicit interest rate 8%
Present value of an ordinary annuity of 1 at 8% for four periods 3.312
There is no transfer of title to the lessee nor purchase option that is reasonably certain to be exercised.
Required:
4. Prepare
5. Prepare journal entries on the books of buyer-lessor for the current year.
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