Question

Krawczek Company will enter into a lease agreement with Heavy Equipment Co. where Krawczek will make lease payments over the next five years. The lease is cancelable and requires equal annual payments of $24,800 per year beginning on January 1 of the first year. The last payment will be January 1 of year 5, and Krawczek will continue to use the asset until December 31 of that year. Other important information includes the following: The fair value of the equipment is $170,000. The applicable discount rate is an 8 percent annual rate. The economic life of the asset is 10 years. Krawczek does not guarantee the residual value of the asset at the end of the lease, and it does not expect to keep the asset at the end of the term. The asset is a standard piece of equipment.

c. What will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)

d. What will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)

Answer 1

BRANCH COMPANY
Bank Reconciliation
July 31,2017
Bank Statement Balance		$ 27,978.00	Book Balance		$ 24,919.00
Add :			Add :
Deposit of July 31	$                               9,632.00		Proceeds of note less collection charges	$ 8,500.00
		$    9,632.00			$    8,500.00
		$ 37,610.00			$ 33,419.00
Deduct :			Deduct :
Check no 3031	$                               1,790.00		NSF Check including fee	$    805.00
Check no 3065	$                                  671.00		Service charge	$       13.00
Check no 3069	$                               2,558.00		Error Check 3056	$       10.00
		$    5,019.00			$       828.00
Adjusted Bank Balance		$ 32,591.00	Adjusted Book Balance		$ 32,591.00
Journal Entries :
Transaction	General Journal	Debit	Credit
1	NO Journal Entry Required
2	NO Journal Entry Required
3	Rent Expense	$          10.00
	To Cash		$                                                             10.00
	(To Record the Adjusting entry related to check no 3056)
4	Cash	$    8,500.00
	To Notes Receivable		$                                                       8,500.00
	(To Record adjusting entry related to Non interest bearing note)
5	Accounts Receivable - Eshaw	$       805.00
	To Cash		$                                                          805.00
	(To Record adjusting entry related to NSF check)
6	Miscellaneous Expense	$          13.00
	To Cash		$                                                             13.00
	(To Record entry related to Service charge)
7	NO Journal Entry Required