Question

Concord Inc. was incorporated in 2019 to operate as a computer software service firm, with an accounting fiscal year ending August 31. Concord’s primary product is a sophisticated online inventory-control system; its customers pay a fixed fee plus a usage charge for using the system.

Concord has leased a large, Alpha-3 computer system from the manufacturer. The lease calls for a monthly rental of $38,000 for the 144 months (12years) of the lease term. The estimated useful life of the computer is 15 years.

All rentals are payable on the first day of the month beginning with August 1, 2020, the date the computer was installed and the lease agreement was signed. The lease is non-cancelable for its 12-year term, and it is secured only by the manufacturer’s chattel lien on the Alpha-3 system.

This lease is to be accounted for as a finance lease by Concord, and it will be amortized by the straight-line method. Borrowed funds for this type of transaction would cost Concord 6% per year (0.50% per month). Following is a schedule of the present value of an annuity due for selected periods discounted at 0.50% per period when payments are made at the beginning of each period.

Periods (months)		Present Value of an Annuity Due Discounted at 0.50% per Period
1		1.000
2		1.995
3		2.985
143		102.497
144		102.987

Prepare all entries Concord should have made in its accounting records during August 2020 relating to this lease. Remember, August 31, 2020, is the end of Concord’s fiscal accounting period, and it will be preparing financial statements on that date. Do not prepare closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 125. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
August 1, 2020August 31, 2020
	(To record the lease.)
August 1, 2020August 31, 2020
	(To record lease payment.)
August 1, 2020August 31, 2020
	(To record interest.)
August 1, 2020August 31, 2020
	(To record amortization.)

Answer 1

Present Value Month Rental Factor PV 144 102.987 38000 39,13,506 Total 39,13,506

Accounts Title & Explanantion Debit Credit Date 2020 Asset on Lease Account (Alpha 3 Computer System) To Lease Liability Account 01 Aug 39,13,506 39,13,506 (To Record Lease) 01 Aug Lease Liability Account 38000 To Cash 38000 (To Lease Payment recorded) Finance Charges To Lease Liability Account Can show on 01st Sep as well 31 Aug 19,378 19,378 (To Record Interest) Amortisation Account To Asset on Lease Account (Alpha 3 Computer System) 31 Aug 27,177 27,177 (To Record Amortisation for a month)

EXTRA Opening Balance [email protected]% Instalment Closing Balance Period Year Aug 1 39,13,506 38,000 38,75,506 38,75,506 38,000 38,56,884 1 Sep 1 19,378 2 Oct 1 38,56,884 19,284 38,000 38,38,168 Nov 1 38,38,168 19,191 38,000 38,19,359 19,097 4 Dec 1 38,19,359 38,000 38,00,456 Jan 1 38,00,456 38,000 37,81,458 5 19,002 Feb 1 6 37,81,458 18,907 38,000 37,62,365 7 Mar 1 37,62,365 18,812 38,000 37,43,177 18,716 37,23,893 Apr 1 37,43,177 38,000 37,23,893 38,000 37,04,512 9 May 1 18,619 10 Jun 1 37,04,512 18,523 38,000 36,85,035 Jul 1 36,85,035 38,000 36,65,460 11 18,425 36,65,460 18,327 36,45,787 12 Aug 1 38,000 18,229 38,000 36,26,016 13 Sep 1 36,45,787 36,26,016 14 Oct 1 18,130 38,000 36,06,146 35,86,177 36,06,146 15 Nov 1 18,031 38,000 35.86,177 17,931 35,66,108 16 Dec 1 38,000 35,66,108 38,000 17 Jan 1 17,831 35,45,939 Feb 1 18 35,45,939 17,730 38,000 35,25,668 Mar 1 19 35,25,668 17,628 38,000 35,05,297 35,05,297 17,526 20 Apr 1 38,000 34,84,823 21 May 1 34,84,823 17,424 38,000 34,64,247 22 Jun 1 34,64,247 17,321 38,000 34,43,568 Jul 1 17,218 23 34,43,568 38,000 34,22,786 34,22,786 38,000 34,01,900 24 Aug 1 17,114 25 Sep 1 34,01,900 17,010 38,000 33,80,910 Oct 1 33,80,910 16,905 33,59,814 26 38,000 27 Nov 1 33,59,814 16,799 38,000 33,38,613 38,000 28 Dec 1 33,38,613 16,693 33,17,306 29 Jan 1 33,17,306 16,587 38,000 32,95,893 Feb 1 32,74,372 30 32,95,893 16,479 38,000 16,372 32,52,744 31 Mar 1 32,74,372 38,000 38,000 32,31,008 32 Apr 1 32,52,744 16,264 33 May 1 32,31,008 16,155 38,000 32,09,163 16,046 34 Jun 1 32,09,163 38,000 31,87,209 Jul 1 31,87,209 15,936 35 38,000 31,65,145 38,000 31,42,971 36 Aug 1 31,65,145 15,826 31,20,685 37 Sep 1 31,42,971 15,715 38,000 Oct 1 30,98,289 38 31,20,685 15.603 38,000 30,98,289 15,491 30,75.780 39 Nov 1 38,000 30,53,159 40 Dec 1 30,75,780 15,379 38,000 30,53,159 41 Jan 1 15,266 38,000 30,30,425 Feb 1 15,152 42 30,30,425 38,000 30,07,577 Mar 1 38,000 29,84,615 29,61,538 43 30,07,577 15,038 44 Apr 1 29,84,615 14,923 38,000 29,61,538 29,38,346 45 May 1 14,808 38,000 29,15,037 29,38,346 14,692 46 Jun 1 38,000 Jul 1 29.15,037 38,000 47 14,575 28,91,613 Aug 1 48 28,91,613 14,458 38,000 28,68,071 14,340 49 Sep 1 28,68,071 38,000 28,44,411 14,222 50 Oct 1 28,44,411 38,000 28,20,633 28,20,633 Nov 1 38,000 27,96,736 14,103 27,96,736 52 Dec 1 13,984 38,000 27,72,720 13,864 38,000 53 Jan 1 27,72,720 27,48,584 Feb 1 27,48,584 54 13,743 38,000 27,24,327 Mar 1 38,000 55 27,24,327 13,622 26,99,948 26,75,448 56 Apr 1 26.99.948 13,500 38,000 26,75,448 13,377 38,000 57 May 1 26,50,825 13,254 58 Jun 1 26,50,825 38,000 26,26,079 Jul 1 26,26,079 38,000 26,01,210 59 13,130 Aug 1 60 26,01,210 13,006 38,000 25,76,216 25,76,216 38,000 25,51,097 61 Sep 1 12,881 38,000 62 Oct 1 25,51,097 12,755 25,25,852 25,00,482 63 Nov 1 25,25,852 12,629 38,000 Dec 1 25,00,482 12,502 38,000 24,74,984 64. 12,375 65 Jan 1 24,74,984 38,000 24,49,359 Feb 1 12,247 38,000 24,23,606 66 24,49,359 67 Mar 1 24,23,606 12,118 38,000 23,97,724 23,97,724 38,000 68 Apr 1 11,989 23,71,712 23,71,712 11,859 23,45,571 69 Мay 1 38,000 23,45,571 23,19,299 22,92,895 11,728 38,000 70 Jun 1 Jul 1 71 23,19,299 11,596 38,000 22,92,895 11,464 72 Aug 1 38,000 22,66,360 73 Sep 1 22,66,360 11,332 38,000 22,39,691 22,39,691 38,000 22,12,890 74 Oct 1 11,198 21,85,954 75 Nov 1 22,12,890 11,064 38,000 Dec 1 21,85,954 76 10,930 38,000 21,58,884 10,794 77 Jan 1 21.58.884 38,000 21,31,679 Feb 1 21,31,679 38,000 78 10,658 21,04,337 79 Mar 1 21,04,337 10,522 38,000 20,76,859 38,000 80 Apr 1 20,76,859 10,384 20,49,243 10,246 20,21,489 81 May 1 20,49,243 38,000 20,21,489 10,107 38,000 19,93,597 82 Jun 1 Jul 1 9,968 83 19,93,597 38,000 19,65,565 84 Aug 1 19,65,565 9,828 38,000 19,37,392 38,000 85 Sep 1 19,37,392 9,687 19,09,079 18,80,625 86 Oct 1 19,09,079 9,545 38,000 18,80,625 87 Nov 1 9,403 38,000 18,52,028 18,52,028 9,260 88 Dec 1 38,000 18,23,288 Jan 1 38,000 17,94,404 89 18,23,288 9,116 Feb 1 17,65,376 90 17,94,404 8,972 38,000 17,65,376 91 Mar 1 8,827 38,000 17,36,203 17,06,884 92 Apr 1 17,36,203 8,681 38,000 17,06,884 38,000 16,77,419 May 1 8,534 16,47,806 94 Jun 1 16,77,419 8,387 38,000 Jul 1 16,47,806 95 8,239 38,000 16,18,045 96 Aug 1 16,18,045 8,090 38,000 15,88,135 38,000 15,58,076 97 Sep 1 15,88,135 7,941 98 Oct 1 15,58,076 7,790 38,000 15,27,866 15,27,866 7,639 38,000 14,97,506 99 Nov 1 7,488 100 Dec 1 14,97,506 38,000 14,66,993 Jan 1 7,335 38,000 101 14,66,993 14,36,328 Feb 1 102 14,36,328 7,182 38,000 14,05,510 14,05,510 103 Mar 1 7,028 38,000 13,74,537 13,74,537 13,43,410 38,000 13,43,410 104 Apr 1 6,873 105 May 1 6,717 38,000 13,12,127 13,12,127 106 Jun 1 6,561 38,000 12,80,688 Jul 1 12,80,688 107 6,403 38,000 12,49,091 38,000 12,17,336 108 Aug 1 12,49,091 6,245 11,85,423 109 Sep 1 12,17,336 6,087 38,000 Oct 1 5,927 38,000 110 11,85,423 11,53,350 11,53,350 5,767 11,21,117 111 Nov 1 38,000 38,000 10,88,723 112 Dec 1 11,21,117 5,606 113 Jan 1 10,88,723 5,444 38,000 10,56,166 Feb 1 5,281 10,23,447 114 10,56,166 38,000 5,117 9,90,564 115 Mar 1 10,23,447 38,000 38,000 116 Apr 1 9,90,564 4,953 9,57,517 117 May 1 9,57,517 4,788 38,000 9,24,305 8,90,926 118 Jun 1 9,24,305 4,622 38,000 Jul 1 8,57,381 119 8,90,926 4,455 38,000 Aug 1 38,000 120 8,57,381 4,287 8,23,668 121 Sep 1 8,23,668 4,118 38,000 7,89,786 Oct 1 122 7,89,786 3,949 38,000 7,55,735 7,55,735 3,779 123 Nov 1 38,000 7,21,514 7,21,514 124 Dec 1 3,608 38,000 6,87,121 125 Jan 1 6,87,121 3,436 38,000 6,52,557 Feb 1 126 6,52,557 3,263 38,000 6,17,820 Mar 1 3,089 38,000 127 6,17,820 5,82,909 128 Apr 1 5,82,909 2,915 38,000 5,47,823 5,47,823 38,000 5,12,562 129 May 1 2,739 4,77,125 130 Jun 1 5,12,562 2,563 38,000 Jul 1 4,77,125 38,000 4,41,511 131 2,386 Aug 1 4,41,511 132 2,208 38,000 4,05,718 4,05,718 133 Sep 1 2,029 38,000 3,69,747 3,69,747 1,849 134 Oct 1 38,000 3,33,596 Nov 1 3,33,596 38,000 135 1,668 2,97,264 136 Dec 1 2,97,264 1,486 38,000 2,60,750 137 Jan 1 2,60,750 1,304 38,000 2,24,054 Feb 1 1,87,174 138 2,24,054 1,120 38,000 Mar 1 38,000 139 1,87,174 936 1,50,110 140 Apr 1 1,50,110 751 38,000 1,12,861 May 1 38,000 75,425 141 1,12,861 564 142 Jun 1 75,425 377 38,000 37,802 Jul 1 37,802 38,000 143 198 -0