On 01/01/2016,Helen Company entered into a non-cancelable lease contract, with Slig Corp. for an equipment that has an estimated useful life of 10 years and

Academic Writing accounting, business-managerial-accounting On 01/01/2016,Helen Company entered into a non-cancelable lease contract, with Slig Corp. for an equipment that has an estimated useful life of 10 years and

accounting, business-managerial-accounting

On 01/01/2016,Helen Company entered into a non-cancelable lease contract, with Slig Corp. for an equipment that has an estimated useful life of 10 years and

On 01/01/2016,Helen Company entered into a non-cancelable lease contract, with Slig Corp. for an equipment that has an estimated useful life of 10 years and fair market value to the lessor,Slig Corp. of $2,800,000. The lease was appropriately classified as a finance lease by both parties. Helen’s incremental borrowing rate is 12%. Slig Corp’s required Return on Investment (ROI) is 10%. Both Helen and Slig use the straight-line method to depreciate Property, Plant and Equipment assets. The lease contains the following provisions: 1. The lessor required the lessee to make equal rental payments at the beginning of each period of the contract term. 2. The lease term is for 8 years with a 2-years renewal option. 3. The contract includes a termination penalty that makes it certain that there will be a renewal of the lease for a period of 2 years after expiration of the initial lease term. 4. The residual value is expected to be $60,000. The lessee guarantees this residual value by the end of the lease term. 5. Assume that it was impractical for the lessee to determine the implicit rate of the lessor. Required : For Helen Company: a. Prepare the necessary journal entries on 01/01/2016 b. Show the Liabilities Section of the Statement of Financial Position in relation to the Lease at 31/12/2017.

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