Question

On January 1, 2021, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 5%. The contract calls for four rent payments of $48,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $368,000 and was expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Required: Prepare the appropriate journal entries for the lessor (Jamison Leasing) 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.)

Answer 1

Answer
r = 5% /2 = 2.5% semiannual
Present Value of Periodic lease payments :-
Lease rental * PVAF (r,n)
$48000 * PVAF (2.5% , 4)
$48000 * 3.76197
$180,575
Date	Particulars	Debit($)	Credit($)
Jan-01	Right of use Asset A/c	$     180,575
	Lease Payable A/c		$   180,575
	(To Record Beginning of Lease)
Jun-30	Interest Expenses($180575*2.5%)	$         4,514
	Lease Payable A/c ($48000-$4514)	$       43,486
	Cash A/c		$     48,000
	(To Record Lease and Interest Payment )
Jun-30	Amortization Expenses A/c	$       43,486
	Right of use asset A/c		$     43,486
	(To Record Amortization on right to use of asset)
Dec-31	Interest Expense A/c((180575-43486)*2.5%)	$         3,427
	Lease Payable A/c ($48000-3427)	$       44,573
	Cash		$     48,000
	(To Record Lease and Interest Payment )
Dec. 31	Amortization Expenses A/c	$       44,573
	Right of use asset A/c		$     44,573
	( To Record Amortization on right to use of asset)