On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 (A) Beginning Balance of Lease Liability $ 51,000 33,000 16,981 (B) Debit Interest on Lease Liability 6.003% X (A) $0 1,981 1,019 $ 3,000 + (C) Debit Lease Liability (D) - (B) $ 18,000 16,019 16,981 $ 51,000 (D) Credit Cash Lease Payment $ 18,000 18,000 18,000 $ 54,000 (E) Ending Balance of Lease Liability (A) - (C) $ 33,000 16,981 0

On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 (A) Beginning Balance of Lease Liability $ 51,000 33,000 16,981 (B) Debit Interest on Lease Liability 6.003% X (A) $0 1,981 1,019 $ 3,000 + (C) Debit Lease Liability (D) - (B) $ 18,000 16,019 16,981 $ 51,000 (D) Credit Cash Lease Payment $ 18,000 18,000 18,000 $ 54,000 (E) Ending Balance of Lease Liability (A) - (C) $ 33,000 16,981 0

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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