On July 1,2011,Janus Company Leased Equipment to Pluto Company Pluto Uses Straight-Line Depreciation for Its Property,plant,and Equipment,and Its Year-End

question 20

Essay

On July 1,2011,Janus Company leased equipment to Pluto Company.The terms of the lease are as follows:
$$\begin{array} { | l | l | } \hline \text { Fair value of leased asset } & 60,000 \\\hline \text { Lease payments, due at end of lease term } & \\\text { starting June } 30,2012 & 12,000 \\\hline \text { Lease term } & 9 \text { years } \\\hline \text { Economic life of leased asset } & 10 \text { years } \\\hline \text { Guaranteed residual value } & 6,000 \\\hline \text { Lessee's incremental borrowing rate } & 15 \% \\\hline\end{array}$$ Pluto uses straight-line depreciation for its property,plant,and equipment,and its year-end is December 31.
Requirement:
Prepare the journal entries for the lease from July 1 through December 31.

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Definitions:

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