Question

CALCULATOR PRINTER VERSION NEXT Exercise 21-1 On January 1, 2017. Surland Corporation signed a year noccable lease for a machine. The terms of the lease called for Sunland to make annual payments of $8,026 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4.900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term Sunland uses the straight-line method of depreciation for all of its plant assets, Sunland's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown Click here to view factor tables Compute the present value of the minimum lease payments (Pound present value factor calculations to decimal places 58,971.) 1.25124 and the final answer to decimal places ag. The present value of the minimumlease payments

Answer 1

present value of minimum lease payment = PVAD10%,5* Lease payments

                        = 4.16987 * 8026

                        = $ 33,467

Date	Account title	Debit	credit
1/1/2017	Right of use asset	33467
	Lease liability		33467
1/1/2017	Lease liability	8026
	cash		8026
31/12/2017	Amortization expense	6693
	Right of use asset (33467/5)		6693
31/12/2017	Interest expense	2544
	Interest payable		2544
	[Being interest accrued for a year . carrying value of lease after first payment = 33467-8026= 25441 ,so interest =25441*10%= 2544.1]
1/1/18	Lease liability	5482
	Interest payable	2544
	cash		8026