Big Bucks leased equipment to Shannon Company on July 1, 2013. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $36,000 are due at the beginning of each fiscal year beginning July 1, 2013. The lease payments were calculated to provide the lessor a 10% return. Big Bucks had constructed the equipment recently for $198,000 and its retail fair value was $300,000. Its estimated useful life was 15 years.
Required:
1. Following the guidance of the new ASU, prepare the journal entries to record the lease by Shannon at its commencement and at December 31, 2013.
2. Following the guidance of the new ASU, prepare the journal entries to record the lease by Big Bucks at its commencement and at December 31, 2013.

Question

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The Answer of Big Bucks leased equipment to Shannon Company on July 1, 2013. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $36,000 are due at the beginning of each fiscal year beginning July 1, 2013. The lease payments were calculated to provide the lessor a 10% return. Big Bucks had constructed the equipment recently for $198,000 and its retail fair value was $300,000. Its estimated useful life was 15 years.
Required:
1. Following the guidance of the new ASU, prepare the journal entries to record the lease by Shannon at its commencement and at December 31, 2013.
2. Following the guidance of the new ASU, prepare the journal entries to record the lease by Big Bucks at its commencement and at December 31, 2013.

Big Bucks Leased Equipment to Shannon Company on July 1