Question

The following facts pertain to a noncancelable lease agreement between Sheridan Leasing Company and Skysong Company, a lessee. Inception date: May 1, 2017
Annual lease payment due at the beginning of each year, beginning with May 1, 2017 $23,811.51
Bargain-purchase option price at end of lease term $3,900
Lease term 5 years
Economic life of leased equipment 10 years
Lessor’s cost $60,000
Fair value of asset at May 1, 2017 $100,000
Lessor’s implicit rate 11 %
Lessee’s incremental borrowing rate 11 %
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0).

Prepare a lease amortization schedule for Skysong Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.) SKYSONG COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Plus Reduction of Lease Interest on Lease Liability Liability Liability Date ВРО 100000 5/1/17 5/1/17 23811.51 23811.51 5/1/18 23811.51 5/1/19 23811.51 5/1/20 23811.51 5/1/21 23811.51 4/30/22

Answer 1

LEASE AMORTIZATION SCHEDULE
	Annual lease payment plus BPO	Interest on liability	Reduction of lease liability	lease liability
5/1/17				100000
5/1/17	23,811.51	0	23811.51	100000-23811.51= 76188.49
5/1/18	23,811.51	76188.49*11%=8380.73	23811.51-8380.73= 15430.78	76188.49-15430.78= 60757.71
5/1/19	23,811.51	60757.71*11%= 6683.35	23811.51-6683.35= 17128.16	60757.71-17128.16= 43629.55
5/1/20	23,811.51	43629.55*11%= 4799.25	23811.51-4799.25= 19012.26	43629.55-19012.26= 24617.29
5/1/21	23,811.51	24617.29*11%= 2707.90	23811.51-2707.90= 21103.61	24617.29-21103.61= 3513.68
30/4/22	3900	386.32 [3513.68*11%]	3513.68	0
Total	122957.55	22957.55	100000