Sells Machinery to Beck Corp

question 20

Essay

sells machinery to Beck Corp. at its fair value of $720,000 and leases it back. The machinery had a carrying value of $630,000, the lease is for 10 years and the implicit rate is 10%. The lease payments of $106,500 start on January 1, 2015. Hester uses straight-line depreciation and there is no residual value.
Instructions
(a) Prepare all of Hester's entries for 2015.
(b) Prepare all of Beck's entries for 2015.

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Definitions:

Partial Performance

A situation in contract law where one party has completed a portion of their contractual obligations, which may entitle them to partial compensation or enforce the remainder of the contract.

Reasonable Quantity

An amount of goods or services deemed to be fair and appropriate under normal circumstances or usage.

UCC

A broad spectrum of laws that oversee every commercial transaction in the United States is encapsulated within the Uniform Commercial Code (UCC).

Industry Standards

Established norms and guidelines within a particular industry that are widely accepted and followed by businesses and professionals within that field.