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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
$202,921
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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