Leewin Brokerage Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $75,000 under a 5-year lease on December 20, 2018. The lease commences on January 1, 2019, and Leewin will return the automobile to Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,000 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,000, due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 7% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2,000. Assuming that this is classified as an operating lease, create an amortization table for the right-of-use asset. Amortization of Right-of-Use Asset Lease Expense Interest Amortization of Right-of-Use Asset 12/31/2019 , 12/31/2020 0 12/31/2021 1 12/31/2022 2 12/31/2023 34 3 Total 14 15 16 Prepare the journal entry required on December 31, 2019. Assume this is an operating lease. 17 18 19
Leewin Brokerage Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $75,000 under a 5-year lease on December 20, 2018. The lease commences on January 1, 2019, and Leewin will return the automobile to Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,000 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,000, due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 7% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2,000. Assuming that this is classified as an operating lease, create an amortization table for the right-of-use asset. Amortization of Right-of-Use Asset Lease Expense Interest Amortization of Right-of-Use Asset 12/31/2019 , 12/31/2020 0 12/31/2021 1 12/31/2022 2 12/31/2023 34 3 Total 14 15 16 Prepare the journal entry required on December 31, 2019. Assume this is an operating lease. 17 18 19
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Leewin Brokerage
Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $75,000 under
a 5-year lease on December 20, 2018. The lease commences on January 1, 2019, and Leewin will return the automobile to
Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of
$10,000 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,000, due on January 1 of
2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 7% and is known by Leewin. There is no purchase option, no
lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2,000.
Assuming that this is classified as an operating lease, create an amortization table for the right-of-use asset.
Amortization of Right-of-Use Asset
Lease Expense
Interest
Amortization of
Right-of-Use Asset
12/31/2019
,
12/31/2020
0
12/31/2021
1
12/31/2022
2
12/31/2023
34
3 Total
14
15
16 Prepare the journal entry required on December 31, 2019. Assume this is an operating lease.
17
18
19
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