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On August 31, 2022, Avalon Ltd. had entered into a 6 year lease for some equipment that has a useful life of 7 years. The lease payments are $26,269 with the first payment having being made August 31, 2022. At the end of the lease, ownership of the equipment will transfer to Avalon. Because the lease was entered into on the last day of Avalon's fiscal year, no depreciation was taken in fiscal 2022 on the leased equipment. This right-of-use asset will be depreciated on the straight line basis. The interest rate implicit in the lease is known to Avalon and is 5%. The August 31, 2022 journal entry for this lease was correctly made (Dr. Lease asset 140,000; Cr. Lease liability 113,731; Cr. Cash 26,269) Your tasks are: (a) Prepare an amortization table for the lease liability from the August 31, 2022 commencement of the lease to its end; (b) Prepare a journal entry to record the August 31, 2023 lease payment; (c) Prepare a journal entry to record the depreciation on the lease asset for the year ended August 31, 2023.

On August 31, 2022, Avalon Ltd. had entered into a 6 year lease for some equipment that has a useful life of 7 years. The lease payments are $26,269 with the first payment having being made August 31, 2022. At the end of the lease, ownership of the equipment will transfer to Avalon. Because the lease was entered into on the last day of Avalon's fiscal year, no depreciation was taken in fiscal 2022 on the leased equipment. This right-of-use asset will be depreciated on the straight line basis. The interest rate implicit in the lease is known to Avalon and is 5%. The August 31, 2022 journal entry for this lease was correctly made (Dr. Lease asset 140,000; Cr. Lease liability 113,731; Cr. Cash 26,269) Your tasks are: (a) Prepare an amortization table for the lease liability from the August 31, 2022 commencement of the lease to its end; (b) Prepare a journal entry to record the August 31, 2023 lease payment; (c) Prepare a journal entry to record the depreciation on the lease asset for the year ended August 31, 2023.

FINANCIAL ACCOUNTING
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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On August 31, 2022, Avalon Ltd. had entered into a 6 year lease for some equipment that has a useful life of 7 years. The lease payments are $26,269 with the first payment having being made August 31, 2022. At the end of the lease, ownership of the equipment will transfer to Avalon. Because the lease was entered into on the last day of Avalon's fiscal year, no depreciation was taken in fiscal 2022 on the leased equipment. This right-of-use asset will be depreciated on the straight line basis. The interest rate implicit in the lease is known to Avalon and is 5%. The August 31, 2022 journal entry for this lease was correctly made (Dr. Lease asset 140,000; Cr. Lease liability 113,731; Cr. Cash 26,269) Your tasks are: (a) Prepare an amortization table for the lease liability from the August 31, 2022 commencement of the lease to its end; (b) Prepare a journal entry to record the August 31, 2023 lease payment; (c) Prepare a journal entry to record the depreciation on the lease asset for the year ended August 31, 2023.
Transcribed Image Text:On August 31, 2022, Avalon Ltd. had entered into a 6 year lease for some equipment that has a useful life of 7 years. The lease payments are $26,269 with the first payment having being made August 31, 2022. At the end of the lease, ownership of the equipment will transfer to Avalon. Because the lease was entered into on the last day of Avalon's fiscal year, no depreciation was taken in fiscal 2022 on the leased equipment. This right-of-use asset will be depreciated on the straight line basis. The interest rate implicit in the lease is known to Avalon and is 5%. The August 31, 2022 journal entry for this lease was correctly made (Dr. Lease asset 140,000; Cr. Lease liability 113,731; Cr. Cash 26,269) Your tasks are: (a) Prepare an amortization table for the lease liability from the August 31, 2022 commencement of the lease to its end; (b) Prepare a journal entry to record the August 31, 2023 lease payment; (c) Prepare a journal entry to record the depreciation on the lease asset for the year ended August 31, 2023.
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