On January 1, 2021, Nath-Langstrom Services, Inc., a computer
software training firm, leased several computers under a two-year
operating lease agreement from ComputerWorld Leasing, which
routinely finances equipment for other firms at an annual interest
rate of 4%. The contract calls for four rent payments of $10,000
each, payable semiannually on June 30 and December 31 each year.
The computers were acquired by ComputerWorld at a cost of $90,000
and were expected to have a useful life of five years with no
residual value. Both firms record amortization and depreciation
semiannually. (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 appropriate journal entries recorded by
Nath-Langstrom Services for the first year of the lease.
2. Prepare appropriate journal entries recorded by
ComputerWorld Leasing for the first year of the lease.
Computation of Present Value of Lease | |||
Half
yearly Payments*PVAF @2%, for 4 period) ($10000*3.80773) |
$38,077 | ||
Journal Entries in the books of Nath-Langstrom Services, Inc. | |||
Date | Account Tittle & Explanation | Debit | Credit |
1-Jan-21 | Right of use asset | $38,077.00 | |
Lease Payable | $38,077.00 | ||
record Lease Asset | |||
30-Jun-21 | Interest Expense( 38077*2%) | $761.54 | |
Lease Payable (BF) | $9,238.46 | ||
Cash | $10,000.00 | ||
record lease payment | |||
30-Jun-21 | Amortization Expense | $9,238.46 | |
Right of use asset | $9,238.46 | ||
record amortization Expense | |||
31-Dec-21 | Interest Expense [($38077 - $9238)*2%] | $576.78 | |
Lease Payable (BF) | $9,423.22 | ||
Cash | $10,000.00 | ||
( record lease payment) | |||
31-Dec-21 | Amortization Expense | $9,423.22 | |
Right of use asset | $9,423.22 | ||
record amortization Expense | |||
Journal Entries in the books of Computer World Leasing | |||
Date | Account Tittle & Explanation | Debit | Credit |
30-Jun-21 | Cash | $10,000.00 | |
Lease revenue | $10,000.00 | ||
record lease payment | |||
30-Jun-21 | Depreciation Expense ($90,000/10) | $9,000.00 | |
Accumulated depreciation | $9,000.00 | ||
Record Dep | |||
31-Dec-21 | Cash | $10,000.00 | |
Lease revenue | $10,000.00 | ||
record lease payment | |||
31-Dec-21 | Depreciation Expense ($90,000/10) | $9,000.00 | |
Accumulated depreciation | $9,000.00 | ||
( record depreciation) | |||
record lease payment | |||
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $14,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $98,000 and were expected to have a useful life of seven years...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $16,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $102,000 and were expected to have a useful life of Six years...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $11,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $92,000 and were expected to have a useful life of five years...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $19,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $109,000 and were expected to have a useful life of Five years...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $18,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $106,000 and were expected to have a useful life of five years...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $16,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $102,000 and were expected to have a useful life of Six years...
On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from Computer World Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $17,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computerworld at a cost of $104,000 and were expected to have a useful life of Five...
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $11,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computerworld at a cost of $92,000 and were expected to have a useful life of five years...
On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $17,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computerworld at a cost of $104,000 and were expected to have a useful life of Five years...
On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $17,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $105,000 and were expected to have a useful life of Six years...