Question

Shamrock Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 7 years and requires equal rental payments of $41,085 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $210,000, an estimated useful life of 7 years, and no estimated residual value. The appropriate interest rate is 12%. Click here to view factor tables. Prepare Shamrock's 2019 and 2020 journal entries, assuming Shamrock depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, eg. 5,275.) Date Account Titles and Eeplanation Derbie (To record l abel (To record l e poyment T raolth -alue

Answer 1

A 1 Journal Entries - Shamrock Company 2 Date Particulars 3 31-Dec-19 Leased Asset Lease liability (To record lease liability) Debit Credit 210000 210000 41085 600 vo 31-Dec-19 Lease liability Cash (To record lease payment) 41085 10 20269.8 20815.2 31-Dec-20 Interest Expense Lease liability Cash (To record interestexpense) 12 13 14 15 41085 16 30000 31-Dec-20 Depreciation expense Accumulated depreciation - Leased (To record amortization of the right-of-use asset) 17 18 30000 19 20

Credit A 1 Journal Entries - Shamrock Company 2 Date Particulars 3 43830 Leased Asset Lease liability 5 (To record lease liability) Debit 210000 4. 210000 . 43830 41085 Lease liability Cash (To record lease payment) 41085 9 10 11 44196 12 13 14 15 16 44196 Interest Expense Lease liability Cash (To record interestexpense) =((210000-41085)*12%) =D13-C11 41085 =210000/7 17 Depreciation expense Accumulated depreciation - Leased Equipment |(To record amortization of the right-of-use asset) =C16 18 19