Question

On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $75,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 7%. Winn also paid a $150,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $225,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.

Required:
Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollars.)

Answer 1

Jan-1 Answers Journal entries pr= [1- (1+ish} &: 1, M: 3,7=7%. bate - particulars 24 Debit credit 2021 Right of use asset All or $346.823 $150.000 +($ 75,000x2.6243 - To Lease payable $346,823 Being Lease payment] prepaid Rent Ale al $150000 $150,000 Than To cash Being Advance kase payment] pecs Interest expense ale or $ 13,778 [C$346,823 - $150000) 77.] Lease payable Ale $61,299 To cash $ 75,000 Being lease payment] Lease payable Ale ($150,000/37 or $50,000 To prepaid Rent 50,000 Being Advance Lease payment] Amortization expenses Ale or $111, 222 {$75000 + $50,000-$13,778] & 111, 222 1. To right of use asset Being Amortization expenses] Depreciation expense Ale or $75,000 TO Accumulated depreciation $75,000 - Leasehold improvement L$225000 3 years) Being Depreciation expenses] peces Interest expenses Ale or $9.498 1 346,823 - $150000-$61,292774 l assos Lease payable Ale or $65,508 . To Cash $75,000 Being qud Lease payable] Lease payable Al (1500003 7 or $50,000 1. To prepaid rent $50000 Being Advance Lease payable]_

bate Leord Dec-1 $75000 particulars La Debit eredit Amortisation expenses nike por $115,508 $75000+$50000-49492] $115,508 - To Right of the Asset Being amortization expenses] Depreciation expenses AC DY $75000 429500033 TO Accumulated Depreciation Being Depreciation expenses] |2023! Interest expense Al Do $1907 pecall ( 346,823-$150000 $61,222- $ 65508)x12] Lease payable ale or $70093 1. To cash $75000 Being 3rd Peace payquent] Lease payable Ale [150000/3] or $ 50000 - To prepaid veut $ 50000 Being Advance lease payable] Amortisationexpenses Ak or $120093 675000 + $50000-14907) 1. To Righ of use assel $120093 Being Amortization expenses] Depreciation expenses Ale or $75000 $225000/3] TO ACCumedated depreciatief | $ 75000 Leasehold improvement Being Depreciation expenses]

Answer 2

Answer:

Date	Particulars	Debit ($)	Credit ($)
Jan 1 2021	Prepaid rent	156,000
	Cash		156,000
	(To record payment rent expense in advance)
Jan 1 2021	Prepaid rent	72,000
	Cash		72,000
	(To record the payment of annual lease rental)
Jan 1 2021	Leasehold improvements expenses	228,000
	Cash		228,000
	(to record the lease improvements expense)
Dec 31 2021	Rent expense	72,000
	Prepaid rent		72,000
	(To record the rent expense)
Dec 31 2021	Rent expense (156000/3)	52000
	Prepaid rent		52000
	(To record the rent allocation from the rent advance)
Dec 31 2021	Depreciation expense (228000/3)	76000
	Accumulated depreciation		76000
	(To record accumulated depreciation expense)