Question

The following facts pertain to non-cancelable lease agreement between Barry leasing company and Deck company:

commencement of lease date

annual lease payment due at the beg. of the year beg. with Jan 1, 2020

residual value of equipment at end of lease term, guaranteed by lessee

expected amount of guaranteed residual that Lessee will pay in cash

Book vlaue of lease equipment on lessor books

lease term

economic life of leased equipment

Fair value of asset at Jan 1 2020

lessee's implicit rate

lessee's incremental borrowing rate

The asset will revert to the lessor at the end of lease term. (note this qualifies as financial lease so you do not need to perform the tests.

a) Prepare the entry on the Lessee's book to capitilize this finance lease on Jan 1, 2020.

B) Prepare all the Lessee entries at the end of first yr

there is no numbers in question

Answer 1

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Date Account Titles and Explanation 1 May, 20 Right-of-use Asset To Lease liability (To record the lease) 1 May, 20 Lease Liability To Cash (To record the first lease Payment) 31 Dec, 20 Interest Expense To Interest Payable (to Record interest Expense) 31 Dec, 20 Depreciation Expense To Accumulated Depreciation (to record amortisation of the use asset) 1 May, 21 Interest Payable To Interest Expense 1 May, 21 Lease Liability Interest Expense To Cash 31 Dec, 22 Interest Expense To Interest Payable (to Record interest Expense) 31 Dec, 21 Depreciation Expense To Accumulated Depreciation lito record amortisation of the right-of-use asset)