Question

Problem 21A-2 b-f (Part Level Submission) On January 1, 2017, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $149,645 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $624,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport's incremental borrowing rate is 6%, and the implicit rate in the lease is 10%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables (b) Your answer is correct. Prepare the journal entries that Bridgeport should record on January 1, 2017. (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 o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to o decimal places, e.g. 5,275.)

Answer 1

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credit Debit $249600 2017 Deprecia) $249600 Ans() - Date Account title & Explanation December 31 Depreciation Expense de Accumulated Depreciation Cto record amortisation of the Teased asset December 31 No-Entry 2017 No - Entry (Worlking Note 2) Donking Note-1 : calculation of Depreciation Expense :- capitallised leased equiment cost : $624000 estimated useful life o 5 yeare Annual Depreuiation under Steight line : $ 124800 method ( $624000/5) Depreciation ratte under Streeight line method : 2014 124,80%2ycom 100) Hence, Depreciation rate under double- : 40% declining balance bati's (204 X2]

Therefore, Depreciation enpense 16624000 X 404): $2,49,600 Working nowe 2: There will be not any interest expense, as the lease payment is at the begénning of each year. There Are the first lease payment will not - Changeable to any interest composent from year-2 onwards, there will be interest chargeable for every lease payment.

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