к 1. Present value calculated Periodic Payment x Factor (Table 2 in the appendix on present value tables: 8%, 12 periods) = Present Value of Lease х 2. Entry prepared in journal form to record the lease agreement To record the lease contract 3. Entry prepared in journal form to record depreciation for the first year To record depreciation on leased equipment for first year years 4. Entries prepared in journal form to record lease payments Year 1 Made lease payment for first year х Year 2 Made lease payment for second year
к 1. Present value calculated Periodic Payment x Factor (Table 2 in the appendix on present value tables: 8%, 12 periods) = Present Value of Lease х 2. Entry prepared in journal form to record the lease agreement To record the lease contract 3. Entry prepared in journal form to record depreciation for the first year To record depreciation on leased equipment for first year years 4. Entries prepared in journal form to record lease payments Year 1 Made lease payment for first year х Year 2 Made lease payment for second year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Recording Lease Obligations
E17B. Business Application ▶ Soong Corporation has leased a piece of equipment
that has a useful life of 12 years. This capital lease requires payments of $43,000 per year
for 12 years. Soong currently is able to borrow money at a long-term interest rate of
8 percent. (Round to the nearest dollar.)
1. Calculate the present value of the lease.
2. Prepare the
3. Prepare the journal entry to record
using the straight-line method.
4. Prepare the journal entries to record the lease payments for the first two years.
Transcribed Image Text:к
1. Present value calculated
Periodic Payment x Factor (Table 2 in the appendix on present value tables:
8%, 12 periods) = Present Value of Lease
х
2. Entry prepared in journal form to record the lease agreement
To record the lease contract
3. Entry prepared in journal form to record depreciation for the first year
To record depreciation on leased
equipment for first year
years
4. Entries prepared in journal form to record lease payments
Transcribed Image Text:Year 1
Made lease payment for first year
х
Year 2
Made lease payment for second year
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