Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit anuary 1, 2024 Date January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement mounts Lease Liability Interest Expense Amortization Expense 0
Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit anuary 1, 2024 Date January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement mounts Lease Liability Interest Expense Amortization Expense 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine
on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments)
machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years
with no residual value. Barwick's implicit interest rate was 9%.
Lease date
Fair value and present value of lease payments
Lease term
Useful life of machine
Residual value
Barwick's implicit interest rate
1. Determine the amount of each lease payment using Excel's PMT function
3. Prepare an amortization schedule for the 4-year term of the lease.
Date
2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024.
Date
General Journal
Debit
January ,2024
January 1, 2024
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
Totals
4. Record the first lease payment on December 31, 2024.
Date
General Journal
December 31, 2024
Lease Payments Effective Interest
5. Record the amortization of right-of-use asset on December 31, 2024.
Date
General Journal
December 31, 2024
Date
January 1, 2024
$16,000,000
0
0
0
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
4 years
4
years
$0
9%
Decrease in
Balance
Debit
Debit
Credit
Outstanding
Balance
6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements.
Balance Sheet Amounts
Right-of-Use
Asset
Credit
Credit
Income Statement Amounts
Lease Liability Interest Expense Amortization
Expense
0
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