Answer -
Journal of Maywood Hydraulics
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
January 1, 2021 |
Right-of-use asset [Refer working note - (1)] Lease payable (To record the lease) |
371049 - |
- 371049 |
December 31, 2021 |
Amortization expense [$371049 / 4 years] Right-of-use asset (To record amortization expense) |
92762 - |
- 92762 |
December 31, 2021 |
Interest expense [$371049 * 5%] Lease payable [Difference] Cash (To record lease payment along with interest) |
18552 81448 - |
- - 100000 |
.
# Working note - (1) - Calculation of amount to be recognized as Lease payable -
Particulars | Formula used | Explanation | Amount ($) | ||
I. | Present value of annual lease payment |
p = Annual lease payment = $100000. r = Interest rate = 5% n = Number of annual lease payment = 4 |
$100000 [1 - (1+0.05)-4 / 0.05] | 354595 | |
II. | Present value of residual value |
C = Residual value = ($70000-$50000) = $20000 r = Interest rate = 5% n= 4 years |
$20000 / (1+0.05)4 | 16454 | |
Amount to be recognized as Lease payable | I + II | 371049 | |||
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