Please answer showing all working!
Period | Discount rate@12% |
0 | 1.00000 |
1 | 0.89286 |
2 | 0.79719 |
3 | 0.71178 |
4 | 0.63552 |
5 | 0.56743 |
Total (0 to 5) | 4.60478 |
Discount rate is Lower of Lessee's Incremental borrowing rate and lessor's Implicit rate if known to the lessee. | |
Here, Lessee is unknown implicit rate of the lessor. Discount rate is Incremental borrowing rate |
Amount | PV factor | Present value | |
Lease | $ 54,291.43 | 4.60478 | 250,000 |
Present value of minimum lease payment | $ 250,000 |
without rounding
Lease amortization table - lessee | |||||
Date | Beginning balance of lease payable | Lease payment | Interest expense (beginning balance of lease payable *12% ) | Reduction in lease payable (lease payment - interest expense) | Beginning balance of lease payable (beginning balance of lease payable - reduction in lease payable) |
Jan 1, 2017 | $ 250,000.00 | $ 54,291.43 | $ 54,291.43 | $ 195,708.57 | |
Jan 1, 2018 | $ 195,708.57 | $ 54,291.43 | $ 23,485.03 | $ 30,806.40 | $ 164,902.17 |
Jan 1, 2019 | $ 164,902.17 | $ 54,291.43 | $ 19,788.26 | $ 34,503.17 | $ 130,399.00 |
Jan 1, 2020 | $ 130,399.00 | $ 54,291.43 | $ 15,647.88 | $ 38,643.55 | $ 91,755.45 |
Jan 1, 2021 | $ 91,755.45 | $ 54,291.43 | $ 11,010.65 | $ 43,280.78 | $ 48,474.67 |
Jan 1, 2022 | $ 48,474.67 | $ 54,291.43 | $ 5,816.96 | $ 48,474.47 | $ 0.20 |
with rounding
Lease amortization table - lessee | |||||
Date | Beginning balance of lease payable | Lease payment | Interest expense (beginning balance of lease payable *12% ) | Reduction in lease payable (lease payment - interest expense) | Beginning balance of lease payable (beginning balance of lease payable - reduction in lease payable) |
Jan 1, 2017 | $ 250,000 | $ 54,291 | $ 54,291 | $ 195,709 | |
Jan 1, 2018 | $ 195,709 | $ 54,291 | $ 23,485 | $ 30,806 | $ 164,902 |
Jan 1, 2019 | $ 164,902 | $ 54,291 | $ 19,788 | $ 34,503 | $ 130,399 |
Jan 1, 2020 | $ 130,399 | $ 54,291 | $ 15,648 | $ 38,644 | $ 91,755 |
Jan 1, 2021 | $ 91,755 | $ 54,291 | $ 11,011 | $ 43,281 | $ 48,475 |
Jan 1, 2022 | $ 48,475 | $ 54,291 | $ 5,817 | $ 48,474 | $ 0 |
Journal entries | |||
Date | General Journal | Debit | Credit |
Jan 1, 2017 | Right of use Asset | 250,000 | |
Lease liability | 250,000 | ||
(To record the lease) | |||
Jan 1, 2017 | Lease liability | 54,291 | |
Cash | 54,291 | ||
(to record Lease paid) | |||
Dec 31, 2017 | Amortization Expense | 41,667 | |
Right of use Asset | 41,667 | ||
(To record Amortization.) (250000/6) | |||
Dec 31, 2017 | Interest expense | 23,485 | |
Interest Payable | 23,485 | ||
(To record accrued interest expense.) | |||
Jan 1, 2018 | Interest Payable | 23,485 | |
Lease liability | 30,806 | ||
Cash | 54,291 | ||
(to record Lease paid) | |||
Dec 31, 2018 | Amortization Expense | 41,667 | |
Right of use Asset | 41,667 | ||
(To record Amortization.) (250000/6) | |||
Dec 31, 2018 | Interest expense | 19,788 | |
Interest Payable | 19,788 | ||
(To record accrued interest expense.) |
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