On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 year 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.
On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 year 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2020, Gold Company entered into a 5-year
lease of a floor of a building with the following terms:
Annual rental for the first two years payable
at the end of each year
Annual rental for the next three years payable
at the end of each year
Initial direct cost paid by lessee
Leasehold improvement
Present value of restoration cost required by contract
Useful life of building
Implicit interest rate
Discount rate for the restoration cost
200,000
300,000
100,000
250,000
50,000
20 years
8%
5%
1.783
2.577
PV of an ordinary annuity of 1 at 8% for two periods
PV of an ordinary annuity of 1 at 8% for three periods
PV of 1 at 8% for two periods
0.857
Required:
1 Compute the lease liability on January 1, 2020.
2. Compute the cost of right of use asset.
3. Compute the depreciation for 2020.
4. Prepare a table of amortization.
5. Prepare journal entries for 2020.
6. Prepare the journal entry for the lease payment on
December 31, 2022.
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