Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. lessee enters into a four-year lease of equipment

Lessee enters into a four-year lease of equipment and concludes that the agreement is a finance...

90.2K

Verified Solution

Question

Accounting

  1. Lessee enters into a four-year lease of equipment and concludesthat the agreement is a finance lease because the lease contains anoption for Lessee to purchase the equipment at the end of the leaseand the Lessee is reasonably certain to exercise that option. Thearrangement provides the following:

Lease term

Four years, with the first payment dueat lease commencement and the remainder annually at the leaseanniversary date thereafter

Annual payments, beginning at leasecommencement and annually thereafter

Commencement – $50,000

Year 2 – $53,000

Year 3 – $55,000

Year 4 -- $60,000

Discount rate

4.5%

PV of lease payments

$204,577

Complete the following schedule toshow the impact on the income statement and balance sheet.

Initial

Year 1

Year 2

Year 3

Year 4

Cash lease payments

Income statement:

Lease expense recognized:

Interest expense

Amortization expense

Total periodic expense

Balance sheet:

ROU asset

Lease liability

  • Prepare the journal entries at the time of the leasecommencement and for Year 1 of the lease term.

Answer & Explanation Solved by verified expert
4.5 Ratings (941 Votes)
The answer is attached below with journal entriesPlease    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Sunland Enterprises, Inc. operates several stores throughout thewestern United States. As part of an...

Accounting
Q

Answer these questions for the value (respect) completely in your opinion with stating a situation if...

Psychology
Q

You are a proposal manager for a government contractor working on a huge new program. You...

General Management
Q

Don't answer these questions, please. See below for a different question. The role of a manager is...

General Management
Q

Kipley Company is a small manufacturing firm located in Pittsburgh, Pennsylvania. The company has a workforce...

Accounting
Q

What is the role of the Taq DNA Polymerase?Causes the DNA strands to separateFrames the...

Biology
Q

R 100 C L 100 100 T F L mH are connected to an ac...

Physics
Q

cire lifetimes is lifetimes is tee thousand miles thousand miles thousand miles X X X...

Statistics
Q

Given the values of f x shown in the chart below which of the following...

Calculus
Q

Craig Company Inc. earns a contribution margin ratio of 36% on its main product is...

Accounting
Q

Help with (a): Develop a standard costing system for the company. ...

Accounting
Q

ABC Inc., expects to sell 26,000 pool cues for $14 each. Direct materials costs are...

Accounting