On January 1,2019,Fold and Hold Corporation Entered into a Capital

question 60

Essay

On January 1,2019,Fold and Hold Corporation entered into a capital lease for equipment,which had a current cash equivalent cost of $38,971.Fold and Hold paid cash of $10,000 on the date of entering into the lease,and promised to pay the balance in six equal annual installments on each December 31 beginning with December 31,2019.The lease contained a 10% interest rate on the unpaid balance.
A.Prepare the journal entry to record the capital lease on January 1,2019.
B.Prepare the entry to record the first installment payment on December 31,2019 (round to the nearest dollar).Assume that no adjusting entries have been made during the year.

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Definitions:

Accounting Profit

The difference between accounting revenues earned and accounting expenses incurred.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Long Service Leave

An employee benefit that provides paid leave for long-term service, specific to certain countries like Australia.

Income Tax Expense

The total amount of income tax a company is obligated to pay, determined by applying the applicable tax rate to the taxable income for a period.