On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $11,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $93,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually.Required:1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease.Record the beginning of the lease for Nath-Langstrom Services (January 1, 2021).Record the lease payment made by Nath-Langstrom Services (June 30, 2021).Record amortization for Nath-Langstrom Services (June 30, 2021).Record the lease payment made by Nath-Langstrom Services (December 31, 2021).Record amortization for Nath-Langstrom Services (December 31, 2021).2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.Record the lease payment received by ComputerWorld Leasing (June 30, 2021).Record depreciation for ComputerWorld Leasing (June 30, 2021).Record the lease payment received by ComputerWorld Leasing (December 31, 2021).Record depreciation for ComputerWorld Leasing (December 31, 2021).

Journal entry: Journal entry is the book of original entry where first transactions are recorded in the books of account. In the accounting cycle, the first step an accountant or a bookkeeper follows is the journal entry. It consists of a debit side and credit side balances. Both debit side balance and credit side balance should be matched.1) Journal Entries Date Account Debit Amount Credit Amount 01-Jan-21 Right of use asset (see working note 1 below) $42,747 Lease Liability $42,747 (Entry to record lease liability) 30-Jun-21 Interest Expense (see working note 2 below) $1,282 Lease Liability $10218 Cash $11,500 (Entry to record interest expense and lease payment) 30-Jun-21 Amortization Expense $10,218 Right of use asset $10,218 (Entry to record amortization expense) 31-Dec-21 Interest Expense (see working note 2 below) $979 Lease Liability $10,521 Cash $11,500 (Entry to record interest expense and lease payment) 31-Dec-21 Amortization Expense $10,521 Right of use asset $10,521 (Entry to record amortization expense) Working Notes: 1 Present Value of lease payments =11,500 x 3.7171* = $42,747 * Present value of an annuity of $1: n = 4, i = 3%. 2 Amortization Schedule Date Payment Interest @ 3% on outstanding balance The decrease in outstanding liability Outstanding liability 01-Jan-21 0 0 0 $42,747 30-Jun-21 $11,500 $1282 $10,218 $32,529 31-Dec $11,500 $979 $10,521 $22,0082) Computer World Journal Entries Date Particulars Debit Amount Credit Amount 30-Jun-21 Cash $11,500 Lease Revenue $11,500 (Entry to record amount received from lessee) 30-Jun-21 Depreciation Expense $9,300 Accumulated Depreciation $9,300 =((93,000 ÷ 5) ÷ 2) (Entry to record semi annual depreciation expense) 31-Dec-21 Cash $11,500 Lease Revenue $11,500 (Entry to record amount received from lessee) 31-Dec-21 Depreciation Expense $9,300 Accumulated Depreciation $9,300 =((94000/5)/2) (Entry to record semi-annual depreciation expense)

Answered: Prepare appropriate journal entries…

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 January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $11,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $93,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually.

Required:

1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease.

Record the beginning of the lease for Nath-Langstrom Services (January 1, 2021).
Record the lease payment made by Nath-Langstrom Services (June 30, 2021).
Record amortization for Nath-Langstrom Services (June 30, 2021).
Record the lease payment made by Nath-Langstrom Services (December 31, 2021).
Record amortization for Nath-Langstrom Services (December 31, 2021).

2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.

Record the lease payment received by ComputerWorld Leasing (June 30, 2021).
Record depreciation for ComputerWorld Leasing (June 30, 2021).
Record the lease payment received by ComputerWorld Leasing (December 31, 2021).
Record depreciation for ComputerWorld Leasing (December 31, 2021).

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