Question

Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtney purchased the equipment from Doane Machines at a cost of $252,000, its fair value. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $i) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term Quarterly lease payments Economic life of asset Interest rate charged by the lessor 2 years (8 quarterly periods) $17,eee at Jan. 1, 2821, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter 5 years Required: Prepare a lease amortization schedule and appropriate entries for Baillie Power from the beginning of the lease through December 31, 2021. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter. Complete this question by entering your answers in the tabs below. Amort Schedule General Journal Prepare a lease amortization schedule. (Round your intermediate calculations and final answers to the nearest whole dollar. Enter all amounts as positive values.) Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance of 17,000 17,000 17,000 01/01/2021 03/31/2021 08/30/2021 09/30/2021 12/31/2021 03/31/2022 06/30/2022 09/30/2022 Total = 34.000 $ 0 $ 17.000 <Amort Schedule General Journal >

Answer 1

Calculation of Present Value of Minimum Lease Payments
Year	Installment Amount	Present Value Factor @3%	Present Value of Lease Liability
Jan 1 2021	17,000	1	17,000
March 31 2021	17,000	0.970873786	16,505
June 30 2021	17,000	0.942595909	16,024
September 30 2021	17,000	0.915141659	15,557
December 30 2021	17,000	0.888487048	15,104
March 31 2022	17,000	0.862608784	14,664
June 30 2022	17,000	0.837484257	14,237
September 30 2022	17,000	0.813091511	13,823
		Total	1,22,915
Lease Amortisation Schedule :
Payment Date	Lease Payments	Effective Interest	Decrease in Balance	Lease Balance
				1,22,915
01-01-2021	17,000	-	17,000	1,05,915
31-03-2021	17,000	3,177	13,823	92,092
30-06-2021	17,000	2,763	14,237	77,855
30-09-2021	17,000	2,336	14,664	63,191
31-12-2021	17,000	1,896	15,104	48,087
31-03-2022	17,000	1,443	15,557	32,529
30-06-2022	17,000	976	16,024	16,505
30-09-2022	17,000	495	16,505	0
Journal Entries
S. No.	Date	Accounts	Debit ($)	Credit ($)
1	01-01-2021	Right of use asset a/c ..Dr	1,22,915
		To Lease Liability a/c		1,22,915
		(Being beginning of lease recorded)
2	01-01-2021	Lease liability a/c ..Dr	17,000
		To Cash a/c		17,000
		(Being lease payment made on 1st Janjuary, 2021 recorded)
3rd - Part 1	31-03-2021	Finance Cost a/c ..Dr	3,177
		To Lease Liability a/c		3,177
		(Being effective interest recognized on lease liability)
3rd - part 2	31-03-2021	Lease liability a/c ..Dr	17,000
		To Cash a/c		17,000
		(Being lease payment recorded)
4	31-03-2021	Depreciation a/c ..Dr	17,559
		To Right of use asset		17,559
		(Being depreciation on right of use asset taken life as 7 quarters i.e. from January 1, 2021 to September 30, 2022 since lease payments stop on September 30,2020)
5th - Part 1	30-06-2021	Finance Cost a/c ..Dr	2,763
		To Lease Liability a/c		2,763
		(Being effective interest recognized on lease liability)
5th - Part 2	30-06-2021	Lease liability a/c ..Dr	17,000
		To Cash a/c		17,000
		(Being lease payment recorded)
6	30-06-2021	Depreciation a/c ..Dr	17,559
		To Right of use asset		17,559
		(Being depreciation recorded on right of use asset)
7th - Part 1	30-09-2021	Finance Cost a/c ..Dr	2,336
		To Lease Liability a/c		2,336
		(Being effective interest recognized on lease liability)
7th - Part 2	30-09-2021	Lease liability a/c ..Dr	17,000
		To Cash a/c		17,000
		(Being lease payment recorded)
8	30-09-2021	Depreciation a/c ..Dr	17,559
		To Right of use asset		17,559
		(Being depreciation recorded on right of use asset)
9th - Part 1	31-12-2021	Finance Cost a/c ..Dr	1,896
		To Lease Liability a/c		1,896
		(Being effective interest recognized on lease liability)
9th - Part 2	31-12-2021	Lease liability a/c ..Dr	17,000
		To Cash a/c		17,000
		(Being lease payment recorded)
10	31-12-2021	Depreciation a/c ..Dr	17,559
		To Right of use asset		17,559
		(Being depreciation recorded on right of use asset)