Question

*Brief Exercise 21-06 Kingbird Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $32,230 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $120,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 5%. Click here to view factor tables. Prepare Kingbird's 2019 and 2020 journal entries, assuming Kingbird depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record lease liability) (To record lease payment) - (To record interest expense) (To record amortization of the right-of-use asset) Question Attempts: Unlimited

Answer 1

Answer
Journal Entries - Kingbird Company
Date	Particulars	Debit	Credit
31-Dec-19	Leased Asset Dr	$     120,000
	To Lease liability		$     120,000
	(To record lease liability)
31-Dec-19	Lease liability Dr	$       32,230
	To Cash		$       32,230
	(To record lease payment)
31-Dec-20	Interest Expense Dr [($120,000 - $32,230)*6%]	$         5,266
	Lease liability Dr   (32230-5266)	$       26,964
	To Cash		$       32,230
	(To record interest exp)
31-Dec-20	Depreciation expense ($120,000/4)	$       30,000
	To Accumulated depreciation - Leased Equipment		$       30,000
	(To record amortization of the right of use assets )