Applying New Lease Accounting Standards for Operating LeasesOn January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease.Details of lease contract Leased assetOffice space Lease term5yearsAnnual lease payment$115,487 Upfront fees$10,000 Cost of debt capital5% a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. Amount of lease liability b. What amount will be added to the balance sheet as an asset? Amount added as an asset The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!! d. Prepare a lease amortization schedule that shows the interest and principal portions of each lease payment.Implicit Interest(Lease Liability,Start x cost of debt)Lease Liability, End(Lease Liability, Start -Lease Amortization)Year1 $234(a)LO(b)5(c)Lease Liability,Start($ in millions)Transaction00000$Balance SheetCashAssete. Use the financial statement effects template to record (a) the lease inception and (b) lease payment for year one and for (c) year two of the lease term. Also show the asset and lease amortization for those sametwo years.0Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction.Note: Indicate a decrease in an account category by including a negative sign with the amount.♦000000$0Lease Amortization(Lease payment -Implicit interest)Noncash Assets0◆0 =00000◆$0 =Liabilities00000◆000Contrib. Capital +0◆0→0EarnedCapital0♦00Income StatementRevenues0◆¶00IExpenses000=NetIncome000 f. At the end of the current year, what additional disclosure would CCH make in its footnotes pertaining to the four remaining lease payments?December 202020212022202320242025ThereafterTotal undiscontinued lease paymentsImputed interestTotal Operating lease liabilityWeighted average remaining lease life in yearsWeighted average discount rate$$00000000000%

Lease accounting:Generally lease accounting is a process organizations uses to record the financial impact in the books of accounts of thier leases. Entities are now required to record the majority of their leases on the b/s following the release of the new lease accounting standards. Different accounting boards maintain the standards containing the guidance on lease accounting.b,The following table shows the computation of lease liability(Amount in $)YearLease paymentPresent value factor @5%Present value of lease payment11154870.9523810998821154870.9070310475031154870.863849976241154870.82279501151154870.7835390488499999Hence the lease liability to be added to the bal sheet at inception of lease $499999 c1The value of right of use asset to be recognized in the bal sheet is the value of lease liability and the upfront feesRight of use assetLease liability + upfront fees$499999+100005099992The asset on the bal sheet to be called as right of use asset, as the asset taken on lease means the taking up of right to use another's asset. DThe following table shows the lease amortization shedule Implicit InterestLease AmortizationLease Liability, EndLease(Lease liability,(Lease Payment -(Lease liability, Start -yearstartstart x 5%) Implicit interest) Lease Amortization)149999925000904874095122409512204769501131450133145011572599762214739421473910737104750109989510998954991099880Total lease amount is $499,999.principal amount and interest is calculated separately as below The following table shows the lease amortization shedule Implicit InterestLease AmortizationLease Liability, EndLease(Lease liability,(Lease Payment -(Lease liability, Start -yearx 5%) Implicit interest) Lease Amortization)149999925000904874095122409512204769501131450133145011572599762214739421473910737104750109989510998954991099880Right of use asset is $509999.

Answered: Applying New Lease Accounting Standards…

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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Question

Applying New Lease Accounting Standards for Operating Leases

On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease.

Details of lease contract
Leased asset	Office space
Lease term	5	years
Annual lease payment	$115,487
Upfront fees	$10,000
Cost of debt capital	5%

a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease.

	Amount of lease liability

What amount will be added to the balance sheet as an asset?

	Amount added as an asset

The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!!

d. Prepare a lease amortization schedule that shows the interest and principal portions of each lease payment.
Implicit Interest
(Lease Liability,
Start x cost of debt)
Lease Liability, End
(Lease Liability, Start -
Lease Amortization)
Year
1 $
2
3
4
(a)
LO
(b)
5
(c)
Lease Liability,
Start
($ in millions)
Transaction
0
0
0
0
0
$
Balance Sheet
Cash
Asset
e. Use the financial statement effects template to record (a) the lease inception and (b) lease payment for year one and for (c) year two of the lease term. Also show the asset and lease amortization for those same
two years.
0
Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction.
Note: Indicate a decrease in an account category by including a negative sign with the amount.
♦
0
0
0
0
0
0
$
0
Lease Amortization
(Lease payment -
Implicit interest)
Noncash Assets
0
◆
0 =
0
0
0
0
0
◆
$
0 =
Liabilities
0
0
0
0
0
◆
0
0
0
Contrib. Capital +
0
◆
0
→
0
Earned
Capital
0
♦
0
0
Income Statement
Revenues
0
◆
¶
0
0
I
Expenses
0
0
0
=
Net
Income
0
0
0

f. At the end of the current year, what additional disclosure would CCH make in its footnotes pertaining to the four remaining lease payments?
December 2020
2021
2022
2023
2024
2025
Thereafter
Total undiscontinued lease payments
Imputed interest
Total Operating lease liability
Weighted average remaining lease life in years
Weighted average discount rate
$
$
0
0
0
0
0
0
0
0
0
0
0%

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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