Question

Your answer is partially correct. Try again. Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Swifty Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2017, is $69,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $4,000, none of which is guaranteed. The agreement requires equal annual rental payments of $22,676 to the lessor, beginning on January 1, 2017. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Swifty uses the straight-line depreciation method for all equipment. Assume that the expected residual value at the end of the lease is $8,000, such that the payments are $21,444. Click here to view the factor table. Prepare all of the journal entries for the lessee for 2017 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answers to 0 decimal places, e.g. 5,265. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Lease liability to lessee =(E(1-(1+r)^-p)/r)(1+r) Accounts and Explanation Debit Date Credit 01-01-2017 Right of use asset To Lease Liability (To record lease) Lease Liability То Cash (To record lease liability) Where $69,000 E $22,676 $69,000 r- 5% P 3 years $22,676 Liability to lessee -(22676(1-1.05^-3)/.05) (1.05) -$64,840 $22,676 31-12-2017 Lease Expense To Lease Liability To Right of use asset $14,308 $2,108 $12,200 Amortisation schedule Rental Principal Payment Closing Time Opening Interest Balance -Орening Balance Balance X =Rental Principal Payments 22,676 $ 20,568 $ 21,596 $ $ 5% 64,840 42,164$ 21,596 $ $ $ $ $ $ 22,676 $ 22,676 $ 22,676 $ $ 0 NA 42,164 1$ 2,108$ 1,080 $ 21,596 $ 2 0 3$ $ $ 0 0 0 Depreciation value (Asset value Residual value)/5 (69,000 8,000)/5 $12,200