Solution 1: | |||
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Equipment Dr | $4,200,000.00 | |
To Lease Payable | $4,200,000.00 | ||
(To record equipment purchased on lease) |
Solution 2: Annual payment on lease = $4,200,000 / Cumulative PV factor at 9% for 4 periods = $4,200,000 / 3.23972 = $1,296,408 |
Lease Amortization Schedule | |||||
Year Ending Dec 31 | Jan 1, Carrying Amount | Lease Payment (Cash Paid) | Interest expense (9% of Jan 1 carrying amount) | Decrease in Lease payable | Dec 31, carrying amount |
31-Dec-21 | $4,200,000 | $1,296,408 | $378,000 | $918,408 | $3,281,592 |
31-Dec-22 | $3,281,592 | $1,296,408 | $295,343 | $1,001,065 | $2,280,527 |
31-Dec-23 | $2,280,527 | $1,296,408 | $205,247 | $1,091,161 | $1,189,367 |
31-Dec-24 | $1,189,367 | $1,296,408 | $107,041 | $1,189,367 | $0 |
$5,185,632 | $985,632 | $4,200,000 |
Solution 3 & 4: | |||
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-21 | Interest expense Dr | $378,000.00 | |
Lease payable | $918,408.00 | ||
To Cash | $1,296,408.00 | ||
(To record lease payment) | |||
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-23 | Interest expense Dr | $205,247.00 | |
Lease payable | $1,091,161.00 | ||
To Cash | $1,296,408.00 | ||
(To record lease payment) |
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