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BE21-10 BE21-12

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BE21-10 Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2012, which requires 6 annual payments of 40,000 each, beginning January 1, 2012. In addition, Indiana Jones
guarantees the lessor a residual value of 20,000 at lease-end. The equipment has a useful life of 6 years.
Assume that for Lost Ark Company, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the equipment is
Prepare Lost Ark’s January 1, 2012, journal entries.

*BE21-12 On January 1, 2012, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $8,705 at the end of each year. The appropriate rate of interest is 10%, and the truck has a useful life of 5 years with no salvage value.

Prepare Irwin’s 2012 journal entries.

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