On January 1,2016,Calloway Company Leased a Machine to Zone Corporation

question 47

Short Answer

On January 1,2016,Calloway Company leased a machine to Zone Corporation.The lease qualifies as a direct financing lease.Calloway paid $240,000 for the machine and is leasing it to Zone for $34,000 per year,an amount that will return 10% to Calloway.The present value of the minimum lease payments is $240,000.The lease payments are due each January 1,beginning in 2016.What is the appropriate interest entry on December 31,2016?

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Definitions:

Reserve

A portion of funds or resources set aside for specific future use, often related to monetary or commodity resources within financial institutions or government reserves.

Excessive Reserves

Funds held by banks over and above the legal reserve requirement, not required but possibly maintained for additional safety or for other purposes.

Required Reserves

Required Reserves are the portion of depositors' balances that banks must have on hand as cash, according to central bank regulations.

Actual Reserves

The physical quantity of a resource or commodity that is known to be available and extractable under current conditions.