E21-11 (L02) (Amortization Schedule and Journal Entries for Lessee) Laura Leasing Company signs an agreement on...
Homework Answers
| P.V of minimum lease payment | ||||
| Annual rental payment=(A) | $ 18,142.95 | |||
| P.V of annuity due 10% for 5 years=(B) | 4.16986 | |||
| P.V of minimum lease payment=(A)*(B) | $ 75,653.56 | |||
| a) | ||||
| Lease Amortization Schedule | ||||
| In the Books of Lessee(Plote Company) | ||||
| (A) | (B)=(D)*10% | (C )=(A)-(B) | (D ) | |
| Date | Annual lease Payment | Interest (10%) | Reduction of lease liability | Lease Liability |
| 01-01-2017 | $ 75,653.56 | |||
| 01-01-2017 | $ 18,142.95 | $ - | $ 18,142.95 | $ 57,510.61 |
| 01-01-2018 | $ 18,142.95 | $ 5,751.06 | $ 12,391.89 | $ 45,118.72 |
| 01-01-2019 | $ 18,142.95 | $ 4,511.87 | $ 13,631.08 | $ 31,487.64 |
| 01-01-2020 | $ 18,142.95 | $ 3,148.76 | $ 14,994.19 | $ 16,493.45 |
| 01-01-2021 | $ 18,142.95 | $ 1,649.50 | $ 16,493.45 | $ - |
| Calculation of lease liability | ||||
| 01-01-2017 | ($75653.56-$18142.95)=$57510.61 | |||
| 01-01-2018 | ($57510.61-$12391.89)=$45118.72 | |||
| 01-01-2019 | ($45118.72-$13631.08)=$31487.64 | |||
| 01-01-2020 | ($31487.64-$14994.19)=$16493.45 | |||
| b) | ||||
| Date | General,Journal | Debit | Credit | |
| 01-01-2017 | Lease Equipment | $ 75,653.56 | ||
| Lease Liability | $ 75,653.56 | |||
| (Lease Equipment Purchased) | ||||
| 01-01-2017 | Lease Liability | $ 18,142.95 | ||
| Cash | $ 18,142.95 | |||
| (Annual rental paid) | ||||
| 2017 | Insurance Expense | $ 900.00 | ||
| Cash | $ 900.00 | |||
| (Amount paid for insurance Expense) | ||||
| 2017 | Property Tax | $ 1,600.00 | ||
| Cash | $ 1,600.00 | |||
| (Amount paid for property tax) | ||||
| 31-12-2017 | Interest Expense | $ 5,751.06 | ||
| Interest Payable | $ 5,751.06 | |||
| (Amount of Interest Payable) | ||||
| 31-12-2017 | Depreciation Expense($75653.56/5) | $ 15,130.71 | ||
| Accumulated Depreciation | $ 15,130.71 | |||
| (Amount of Depreciation Expense) | ||||
| 01-01-2018 | Interest Payable | $ 5,751.06 | ||
| Interest Expense | $ 5,751.06 | |||
| (Reversal of interest payable) | ||||
| 01-01-2018 | Interest Expense | $ 5,751.06 | ||
| Lease Liability | $ 12,391.89 | |||
| Cash | $ 18,142.95 | |||
| (Amount of Interest and lease liability paid) | ||||
| 2018 | Insurance Expense | $ 900.00 | ||
| Cash | $ 900.00 | |||
| (Amount paid for insurance Expense) | ||||
| 2018 | Property Tax | $ 1,600.00 | ||
| Cash | $ 1,600.00 | |||
| (Amount paid for property tax) | ||||
| 31-12-2018 | Interest Expense | $ 4,511.87 | ||
| Interest Payable | $ 4,511.87 | |||
| (Amount of Interest Payable) | ||||
| 31-12-2018 | Depreciation Expense($75653.56/5) | $ 15,130.71 | ||
| Accumulated Depreciation | $ 15,130.71 | |||
| (Amount of Depreciation Expense) |
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