Question

On January 1, 2018, 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 4%. The contract calls for four rent payments of $47,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $367,000 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 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)

Answer 1

Present value of periodic lease payments:
$47000*3.80773 = 178,963
*Present value of an annuity of $1: n = 4, i = 2%. Because of Half year
The appropriate journal entries for the lessee from the beginning of the lease through the end of 2018
Date	Particulars	Dr	Cr
Jan-01	Right-of-use asset	178,963
	Lease payable		178,963
Jun. 30	Interest expense [2% × ($178,963 − 0)]	3,579
	Lease payable (difference)	43,421
	Cash (lease payment)		47,000
Jun. 30	Amortization expense ($47,000 − 3,579)	43,421
	Right-of-use asset		43,421
Dec-31	Interest expense [2% × ($178,963 − 43,421)]	2,711
	Lease payable (difference)	44,289
	Cash (lease payment)		47,000
Dec-31	Amortization expense ($47,000 − 2711)	44,289
	Right-of-use asset		44,289