Question

On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $16,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $102,000 and were expected to have a useful life of Six years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for both the lessee and the lessor 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. (Round your intermediate calculations and final answers to the nearest whole dollar.)

Answer 1

Journal Entries in the books of Nath-Langstrom Services, Inc.
Date	Account Tittle & Explanation	Debit	Credit
1-Jan-21	Right of use asset	$60,924.00
	Lease Payable		$60,924.00
	record Lease Asset
30-Jun-21	Interest Expense( 60924*2%)	$1,218.48
	Lease Payable (BF)	$14,781.52
	Cash		$16,000.00
	record lease payment
30-Jun-21	Amortization Expense (60924/4)	$15,231.00
	Right of use asset		$15,231.00
	record amortization Expense
31-Dec-21	Interest Expense [($60924 - $14781.52)*2%]	$922.85
	Lease Payable (BF)	$15,077.15
	Cash		$16,000.00
	( record lease payment)
31-Dec-21	Amortization Expense	$15,231.00
	Right of use asset		$15,231.00
	record amortization Expense
Journal Entries in the books of Computer World Leasing
Date	Account Tittle & Explanation	Debit	Credit
30-Jun-21	Cash	$16,000.00
	Lease revenue		$16,000.00
	record lease payment
30-Jun-21	Depreciation Expense ($102,000/6)	$17,000.00
	Accumulated depreciation		$17,000.00
	Record Dep
31-Dec-21	Cash	$16,000.00
	Lease revenue		$16,000.00
	record lease payment
31-Dec-21	Depreciation Expense ($102,000/6)	$17,000.00
	Accumulated depreciation		$17,000.00
	( record depreciation)