Reporting Operating Lease—LesseeOn January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $85,099, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $400,000 and a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor’s implicit rate is 7.5%, which is unknown to the lessee. The lessee’s incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. 1. Prepare a schedule of the right-of-use asset for the 4-year lease term. -- Note: Round each amount in the schedule to the nearest whole dollar (attached in first picture)2. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.’s accounting year ends December 31. -- Note: Round your answers to the nearest whole dollar. (attached in second picture) Lease Liability ScheduleDateJan. 1, Year 1c. Prepare a schedule of the right-of-use asset for the 4-year lease term.• Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.Year 1 $Year 2 $Year 3 $Year 4 $Total $LeaseExpenseRight-of-Use Asset ScheduleIntereston Liability85,099✔ $85,099✔ $85,099✔ $85,099 $340,396 $Right-of-Use AssetChange0 x $0 x $0 x $0✔ $0 $Journal EntriesRight-of-Use Asset304,407$0 x $0 x $0 x$0 x $00 x0 xO0 Lease Liability Schedule Right-of-Use Asset Schedule Journal Entriesd. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.'s accounting year ends December 31.• Note: Round your answers to the nearest whole dollar.DateJan. 1, Year 1Jan. 1, Year 1Dec. 31, Year 1Jan. 1, Year 2Dec. 31, Year 2Account NameRight-of-Use AssetLease LiabilityTo record lease liability and right-of-use assetLease LiabilityCashTo record lease paymentLease ExpenseLease LiabilityRight-of-Use AssetTo record lease expenseLease LiabilityCashTo record lease paymentLease LiabilityTo record lease expense><>>Dr.304,407085,099000085,0990000Cr.0304,407085,0990 x17,545 ✔0x085,0990 x12,140✔0 x

Lease Amortization: Lease amortization can be defined as the decrease in the value of an asset…

Answered: Reporting Operating Lease—Lessee On…

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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Reporting Operating Lease—Lessee
On January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $85,099, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $400,000 and a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor’s implicit rate is 7.5%, which is unknown to the lessee. The lessee’s incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease.

1. Prepare a schedule of the right-of-use asset for the 4-year lease term. -- Note: Round each amount in the schedule to the nearest whole dollar (attached in first picture)

2. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.’s accounting year ends December 31. -- Note: Round your answers to the nearest whole dollar. (attached in second picture)

Lease Liability Schedule
Date
Jan. 1, Year 1
c. Prepare a schedule of the right-of-use asset for the 4-year lease term.
• Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
Year 1 $
Year 2 $
Year 3 $
Year 4 $
Total $
Lease
Expense
Right-of-Use Asset Schedule
Interest
on Liability
85,099✔ $
85,099✔ $
85,099✔ $
85,099 $
340,396 $
Right-of-Use Asset
Change
0 x $
0 x $
0 x $
0✔ $
0 $
Journal Entries
Right-of-Use Asset
304,407
$
0 x $
0 x $
0 x
$
0 x $
0
0 x
0 x
O
0

Lease Liability Schedule Right-of-Use Asset Schedule Journal Entries
d. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.'s accounting year ends December 31.
• Note: Round your answers to the nearest whole dollar.
Date
Jan. 1, Year 1
Jan. 1, Year 1
Dec. 31, Year 1
Jan. 1, Year 2
Dec. 31, Year 2
Account Name
Right-of-Use Asset
Lease Liability
To record lease liability and right-of-use asset
Lease Liability
Cash
To record lease payment
Lease Expense
Lease Liability
Right-of-Use Asset
To record lease expense
Lease Liability
Cash
To record lease payment
Lease Liability
To record lease expense
>
<
>
>
Dr.
304,407
0
85,099
0
0
0
0
85,099
0
0
0
0
Cr.
0
304,407
0
85,099
0 x
17,545 ✔
0x
0
85,099
0 x
12,140✔
0 x

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I need the Right of Use Asset Ammortization table, not the lease liability amortization table.

Lease Liability Schedule
c. Prepare a schedule of the right-of-use asset for the 4-year lease term.
• Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
Date
Jan. 1, Year 1
Year 1 $
Year 2 $
Year 3 $
Year 4 $
Total $
Lease
Expense
Right-of-Use Asset Schedule Journal Entries
Interest
on Liability
$
85,099
85,099 $
85,099✔ $
85,099 $
340,396 $
Right-of-Use Asset
Change
0 x $
0 x $
0 x $
0✔ $
0 $
Right-of-Use Asset
$
* $
0 x $
0 x $
0 x $
0
304,407
0 x
0 x
0
0

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