On December 31, Year One, the Abertion Company decides to lease a piece of equipment rather than buy it. The lease is for ten years. Payments are $22,000 each December 31 beginning on December 31, Year One. The implicit rate is 9 percent and is known by Abertion. The present value of an annuity due of $1 at 9 percent for ten periods is 6.99525. Assume this lease is an operating lease. What journal entries are made in Year Two? Lease liability Cash Lease expense Lease Liability 21,995 Right-of-Use Asset Lease Liability Cash 21,995 21,995 Right-of-Use Asset 21,995 Lease liability 21,995 Lease Expense 21,995 Lease Payable 10,124 11,871 21,995 21,995 21,995
On December 31, Year One, the Abertion Company decides to lease a piece of equipment rather than buy it. The lease is for ten years. Payments are $22,000 each December 31 beginning on December 31, Year One. The implicit rate is 9 percent and is known by Abertion. The present value of an annuity due of $1 at 9 percent for ten periods is 6.99525. Assume this lease is an operating lease. What journal entries are made in Year Two? Lease liability Cash Lease expense Lease Liability 21,995 Right-of-Use Asset Lease Liability Cash 21,995 21,995 Right-of-Use Asset 21,995 Lease liability 21,995 Lease Expense 21,995 Lease Payable 10,124 11,871 21,995 21,995 21,995
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, Year One, the Abertion Company decides to lease a piece of equipment rather than buy it. The lease is for ten years. Payments are $22,000 each December 31 beginning on December 31, Year One.
The implicit rate is 9 percent and is known by Abertion. The present value of an annuity due of $1 at 9 percent for ten periods is 6.99525. Assume this lease is an operating lease. What journal entries are made in
Year Two?
Lease liability
Cash
Lease expense
Lease Liability
21,995
Right-of-Use Asset
Lease Liability
Cash
21,995
21,995
Right-of-Use Asset 21,995
Lease liability
21,995
Lease Expense 21,995
Lease Payable
10,124
11,871
21,995
21,995
21,995
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