Renth Corporation Entered into the Following Transactions

question 52

Essay

Renth Corporation entered into the following transactions:
1. On January 1 2017 Lee Car Rental leased a car to Renth Corporation for one year. Terms of the operating lease call for monthly payments of $650.
2. On January 1 2017 Renth Corporation entered into an agreement to lease 20 machines from Sweis Corporation. The terms of the lease agreement require an initial payment of $500000 and then three annual rental payments of $600000 beginning on December 31 2017. The present value of the three rental payments is $1492108. The lease is a capital lease.
Instructions
Prepare the appropriate journal entries to be made by Renth Corporation in January related to the lease transactions.

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Definitions:

Return on Total Assets

A financial ratio that measures the profitability of a company in relation to its total assets, indicating how efficient management is at using its assets to generate earnings.

Interest Expense

A financial charge for borrowing money or the cost incurred on debt.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Financial Leverage

A difference between the rate of return on assets and the rate paid to creditors.