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 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 $1) (Use appropriate factor(s) from the
tables.)
Required:
Prepare the appropriate entries for both the lessee and the lessor
from the beginning of the lease through the end of 2021.
(If no entry is required for a transaction/event, select
"No journal entry required" in the first account field. (Round your
intermediate calculations and final answers to the nearest whole
dollar.)
In the books of Lessee (Nath-langstrom services Inc.) | |||||||
Date | Account titles and explanation | Debit | Credit | ||||
2021 | |||||||
Jan 1. | Right of use of asset | (Note:1) | 70783 | ||||
Lease payable | 70783 | ||||||
(Lease liability recorded) | |||||||
June 30. | Interest expense | (70783*4%*1/2) | 1416 | ||||
Lease payable | (19500-1416) | 18084 | |||||
Cash | 19500 | ||||||
(Lease payment made) | |||||||
June 30. | Amortization expense | 18084 | |||||
Right of use of asset | 18084 | ||||||
(Amortization recorded) | |||||||
Dec 31. | Interest expense | (70783-18084)*4%*1/2 | 1054 | ||||
Lease payable | (19500-1054) | 18446 | |||||
Cash | 19500 | ||||||
(Lease payment made) | |||||||
Dec 31. | Amortization expense | 18446 | |||||
Right of use of asset | 18446 | ||||||
(Amortization recorded) | |||||||
Note:1 | |||||||
Lease rental=$ 19500 | |||||||
Discount factor=Interest rate=4% | |||||||
Lease term=4 rental payments | |||||||
Lease liability=Lease rental*Discount factor at 4% for 4 years=19500*3.629895=70782.95=$ 70783 | |||||||
In the books of Lessor (Computer world) | |||||||
Date | Account titles and explanation | Debit | Credit | ||||
Jan 1. | No entry | ||||||
(Since it is an operating lease) | |||||||
June 30. | Cash | 19500 | |||||
Lease revenue | 19500 | ||||||
(Lease revenue recorded) | |||||||
June 30. | Depreciation expense | (Note:2) | 10900 | ||||
Accumulated depreciation | 10900 | ||||||
(Depreciation recorded) | |||||||
Dec 31. | Cash | 19500 | |||||
Lease revenue | 19500 | ||||||
(Lease revenue recorded) | |||||||
Dec 31. | Depreciation expense | (Note:2) | 10900 | ||||
Accumulated depreciation | 10900 | ||||||
(Depreciation recorded) | |||||||
Note:2 | |||||||
Depreciation expense for the year=(Cost-Residual value)/Useful life=(109000-0)/5=$ 21800 | |||||||
Depreciation expense for 6 months=21800/2=$ 10900 | |||||||
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 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 $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 $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 4%. The contract calls for four rent payments of $16,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $103,000 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 $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 $10,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $91,000 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 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 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 4%. The contract calls for four rent payments of $13,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $97,000 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 $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...