Question

On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $111.000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8% Winn also paid a $126,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $237,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of S1 and PVAD of Sl) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn's fiscal year is the calendar year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollars.) View transaction list Journal entry worksheet 2 3 4 5 6 7 8 ..... 11 Record the beginning of the lease for Winn. Note: Enter debits before credits

Answer 1

Recording of journal entries of the beginning of the lease for Winn. Refer to the below image for more detailed solution.

Record the beginning of the lease for winn. Requirement : particulars Credit $412058 Date Debit Jan 1, 2021 Right of use asset Alcor $412058 - To lease payable (p.v. of lease payments) working : $ 126000 + ($111.000x 25771*)) = $412058 * present value of an ordinary annuity of $ 1:n=3, i=84 $126000 Jan 1, 2021 lease payable To cash ale or (advance payment) $126000