Question

A lease agreement that qualifies as a finance lease calls for annual lease payments of $60,000 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 7% (EV of $1. PV of $1. EVA of $1 PVA of $1. EVAD of S1 and PVAD of 51) (Use appropriate factor(s) from the tables provided.) Required: a. Complete the amortization schedule for the first two payments. b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Complete this question by entering your answers in the tabs below. Required A Required B Complete the amortization schedule for the first two payments. (Enter all amounts as positive values. Round your answers to the nearest whole dollar.) Date Lease Payment Effective Interest Decrease in Balance Outstanding Balance January, Year 1 January, Year 1 January, Year 2 $ 60,000 60,000 Red Required 3 >

Answer 1

Please use discounting factor provided in you question Lease payment $ 60,000 Annuity factor, 4%, 20 Years 5.10020 Present value of lease payment $ 306,012 PV FACTOR @16%/ 4 = 4% 1 year1 1.00000 year2 0.93458 year3 0.87344 year4 0.81630 year5 0.76290 year6 0.71299 Annuity 5.10020 Date january, year1 january, year 1 january, year 2 january, year 3 january, year 4 january, year 5 january, year 6 Annual lease decrease in outstanding Payment effective ineterest balance balance CEE x 7% DEB-C E=E-D $ 306,012 60,000.00 $ 60,000 $ 246,012 $ 60,000.00 $ 17,221 $ 42,779 $ 203,233 60,000.00 $ 14,226 $ 45,774 $ 157,459 60,000.00 $ 11,022 $ 48,978 $ 108,481 $ 60,000.00 $ 7,594 $ 52,406 $ 56,075 $ 60,000.00 $ 3,925 $ 56,075 $ 0 Required b) lease liability in balance sheet = Interest payable $ $ 246,012 17,221