Ivan Oder Co

question 54

Essay

Ivan Oder Co. recorded a right-of-use asset of $300,000 in a 10-year operating lease. Lease payments of $44,385 are made annually at January 1 of each year beginning January 1, 2018. The interest rate charged by the lessor was 10%.
Required: Prepare the appropriate journal entries on January 1, 2018, and December 31, 2018. Round your answers to the nearest whole dollar amounts.

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Definitions:

Variable Cost Per Unit

The cost that varies with the level of output or activity, calculated on a per-unit basis.

Fixed Costs

Expenses that do not change with changes in the level of production or sales, such as rent, salaries, and insurance.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, used to cover fixed costs and generate profit.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit; an important metric in understanding per unit profitability and in break-even analysis.