Question

the entries are correct please help on the amounts!!

On January 1, 2021, Rick's Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option Annual lease payments are $16,500 due on December 31 of each year, calculated by the lessor using a 4% interest rate. The agreement is considered an operating lease. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare Rick's journal entry to record for the right-of-use asset and lease liability at January 1, 2021 2. Prepare the journal entries to record interest and amortization at December 31, 2021

Answer 1

Answer:

1.)

Date	Particulars	Debit ($)	Credit ($)
Jan 1 2021	Right of use asset	99035
	Lease payable (16500 x 6.0021)		99035
	(To record the inception of lease payable)

2.)

Date	Particulars	Debit ($)	Credit ($)
Jan 1 2021	Interest expense (4% x $99035)	3961
	Lease payable	12539
	Cash (leasepayment)		16500
	(To record the lease payment)
Ded 31 2021	Amortization expense (16500-3961)	12539
	Right of use asset		12539
	(To record the amortization expense)