Question

Question 2 Incomplete answer Marked out of 69.00 P Flag question Reporting Finance Lease, Guaranteed Residual-Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1, 2020. The underlying asset has an estimated life of six years, and the property reverts to Mac at the end of the lease term. Lease payments of $52,461 are payable on January 1 of each year and were set to yield Mac a return of 8%, which was known to Ash. The estimated residual value at the end of the lease term is $44,000 and is guaranteed by Ash Corporation. Ash expects the estimated residual value at the end of the lease term to be $44,000. The lease contains no purchase option. a. How would Ash Corporation classify the lease? Finance Lease Amortization Schedule Journal Entries: Estimated Residual = Guaranteed Residual Journal Entries: Estimated Residual < Guaranteed Residual b. Prepare an amortization schedule of the lease liability. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Lease Interest Reduction of Date Payment on Liability Lease Liability Lease Liability Jan. 1, 2020 Jan. 1, 2020 $ 0 0 $ Jan. 1, 2021 0 0 0 Jan. 1, 2022 0 0 Jan. 1, 2023 0 0 Total $ 0 $ 0 $ 0

Answer 1

Date	Lease Payment	Interest on Liability	Reduction of Lease Liability	Lease Liability
Jan 1, 2020				$173,758
Jan 1, 2020	$52,461	$13,901	$38,560	$135,198
Jan 1, 2021	$52,461	$10,816	$41,645	$93,552
Jan 1, 2022	$52,461	$7,484	$44,977	$48,576
Jan 1, 2023	$52,461	$3,885	$48,576	($0)
Total	$209,844	$36,086	$173,758
Lease Payment Amount	PV Factor	Present value of lease payments
$52,461	3.31213	$173,758