A lease with the following terms: • Lease period: 5 years, beginning January 1, 2016. Non-cancelable.. Rental amount: $65,000 payable annually in advance (at the beginning of year); includes $5,000 executory costs. The first lease payment is made on January 1, 2016, and four subsequent payments are made on each December 31 (Balance Sheet date). • Estimated economic life of equipment: 5 years. • Expected residual value: none. Both implicit and incremental rates: 10% Required: On behalf of Lessee and Lessor, (a ) Prepare the lease payment schedule to show the lease liabilities and interest expense over the lease period. (b) Provide all journal entries in the year of 2016. (c) Show statement of financial position (extract) at 31 December 2016 in respect of lease.

A lease with the following terms: • Lease period: 5 years, beginning January 1, 2016. Non-cancelable.. Rental amount: $65,000 payable annually in advance (at the beginning of year); includes $5,000 executory costs. The first lease payment is made on January 1, 2016, and four subsequent payments are made on each December 31 (Balance Sheet date). • Estimated economic life of equipment: 5 years. • Expected residual value: none. Both implicit and incremental rates: 10% Required: On behalf of Lessee and Lessor, (a ) Prepare the lease payment schedule to show the lease liabilities and interest expense over the lease period. (b) Provide all journal entries in the year of 2016. (c) Show statement of financial position (extract) at 31 December 2016 in respect of lease.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

A lease with the following terms: Lease period: 5 years, beginning January 1, 2016. Non - cancelable..
Rental amount: $65,000 payable annually in advance (at the beginning of year); includes $5,000 executory
costs. The first lease payment is made on January 1, 2016, and four subsequent payments are made on
each December 31 (Balance Sheet date). • Estimated economic life of equipment: 5 years. • Expected
residual value: none. Both implicit and incremental rates: 10% Required: On behalf of Lessee and Lessor, (a
) Prepare the lease payment schedule to show the lease liabilities and interest expense over the lease period.
(b) Provide all journal entries in the year of 2016. (c) Show statement of financial position (extract) at 31
December 2016 in respect of lease.

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