Question

The following relate to an operating lease agreement: a. The lease term is 3 years, beginning January 1, 2018 b. The leased asset cost the lessor $750,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets. c. Annual lease payments at the beginning of each year were $136,500. d. Incremental costs of negotiating costs of negotiating and consummating the completed lease transaction incurred by the lessor were $4,800 Required: Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease term. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list 1 Record the cash received. 2 Record the payment of initial direct costs. 3 Record the cost of the lease. 4 Record the depreciation expense. 5 Record the rent revenue. Credit 6 Record the cash received. 7 Record the cost of the lease. 8 Record the depreciation expense. Note : = journal entry has been entered

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Answer 1

S.No.	Date	Particulars	Debit	Credit
1	01.01.2018	Cash A/c Dr.	136500
		To Unearned Lease Rent Revenue		136500
		(Being Lease payment received in advance)
2	01.01.2018	Initial Direct cost (Leased Assets) A/c Dr.	4800
		To Cash		4800
		(Being Initial Direct Cost Paid)
3	31.12.2018	Lease Cost A/c Dr.	1600
		To Initial Direct cost (Leased Assets)		1600
		(Being Cost of lease recognised)
4	31.12.2018	Depreciation A/c Dr	93750
		To Leased Assets		93750
		(Being depreciation charged)
5	31.12.2018	Unearned Lease Rent Revenue A/c Dr.	136500
		To Lease Rent		136500
		(Being rent income recognised)
6	01.01.2019	Cash A/c Dr.	136500
		To Unearned Lease Rent Revenue		136500
		(Being Lease payment received in advance)
7	31.12.2019	Lease Cost A/c Dr.	1600
		To Initial Direct cost (Leased Assets)		1600
		(Being Cost of lease recognised)
8	31.12.2019	Depreciation A/c Dr	93750
		To Leased Assets		93750
		(Being depreciation charged)
9	31.12.2019	Unearned Lease Rent Revenue A/c Dr.	136500
		To Lease Rent		136500
		(Being rent income recognised)
10	01.01.2020	Cash A/c Dr.	136500
		To Unearned Lease Rent Revenue		136500
		(Being Lease payment received in advance)
11	31.12.2020	Lease Cost A/c Dr.	1600
		To Initial Direct cost (Leased Assets)		1600
		(Being Cost of lease recognised)
12	31.12.2020	Depreciation A/c Dr	93750
		To Leased Assets		93750
		(Being depreciation charged)
13	31.12.2020	Unearned Lease Rent Revenue A/c Dr.	136500
		To Lease Rent		136500
		(Being rent income recognised)