Question

On January 1, 2021, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $853,031 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2024, will be $114,000. Negotiations led to the lessee guaranteeing a $168,000 residual value. Equal payments under the lease are $214,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Nguyen is aware that Nevels used a 7% interest rate when calculating lease payments. (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 the appropriate entries for both Nguyen and Nevels on January 1, 2021, to record the lease. 2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2021, related to the lease Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2021, to record the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to the nearest whole dollar.) View transaction list Journal entry worksheet Record the beginning of the lease for Nguyen. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021

Answer 1

Jan 1, 2021, Ve Us On u NGUt) Appropriate mlulu U AA We Answer Page No 0 0-Appagpriate entures for both Nguyen and devels on Jan 1, 2021, one on the lease Fan value of lease = {Annual lease payment. x PVAF (77,490) + [Residual value x PvF ( 4454 yr)] - (214900 x -07 *5") + (sook entity = (214000 x 3: 38401) + (168000 80.7629) € 724863 +128168 = $.853031 1. Particular Gedit Jan 1, Right of use asset $853031 hease payable $853031 Dalej Debit 2021 Jant, $853031 2021 Lease receivable Lease asset $853031

Page No ③ Arezoprente enbúcs for both Nguyen & devels on dec 31, 2021 related to the lease Lease payable = 214000 - (8530313 77) = 214000 - 59412 = $154288 = $ 59412 Interest expense - 853031 x +47 Amortization expense = 85303). 4 ata/16 $213258 = Gredit Date Particular Lease payable Interest expense Debit $154288 Dec 31, $ 59712 2021 $ 214000 - Cash $213258 dec 31, 2021 $213258 Amortization expense Right of use asset . cash interest income Lease vicceivable $ 214000 dec 31, 2021 $59712 $154288