Question

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 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 provided.)

Required:

1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease.

2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.

Answer 1

Answert present value of Lease payment=pli- + payment $10,500 Sale 4 Interest EV): 47 semiannual interest - 44=2 % ) 0.02 No. of payment periodo (n} = 4 periods present value = $10,500,- (+0.0237 - $ 10,500x3.80713 .present value = $39,981 Amortizalion schedule :- 0.02 Date payments Interest@2%* out standing balance Decrease in Balance $970038 $9.894.39 $10,092.28 $ 10994. outstandling Balance. $39981 $30,280.62 $20.386.23 $10,294. $0. F Debit Credi Dr $39.981 Janal $39,981 or 161/2001 6/30/21 $10,500 $799.62 12/31/41 $ 10,500 $605.61 6/30/28 $10.500 $407.72 12/31/28 $10,500 5.88 In the books of nath-Laugetsom. bate particulars 2021 Right of use asset Alc To Lease payable Jan-30 Interest expense ale Lease payable ale To cash Amortization expense Ale To Right of are asset Dec-31 Interest expense Ale Lease payable Ale - To cash Amortization expence Ale 1. To Righ of use Asset $799.62 $9700.38 Or $10.500 or $9700.38 $9700.38 $605,61 4989439 $10.500 or $9894.39 $9894.39

| 2) Journal entries in the books of computer world :- credit emas bate 2021 Junio particulars Ale To Lease revence TLF Debit or $ 10,500 Cash $10,500 $9100 Depreciation expense ale or TO Accumulated Depreciation $9100 [C$ 91000/5)/2] or $ 10 500 Dec-31 cash Ale TO Lease Revence $10500 $9100 Depreciation empeuse Al DY TO Accumulated Depreciation $9100 [(#91000/5)83