Problem 10-12AC Accounting for Operating Lease LO On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a operating lease. The lease requires three $26,486 lease payments (the first at the beginning of the lease and the rest at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $75,100, using a 5.920% interest rate. The lease payment schedule follows. Date Jan. 1. Year 1 Dec. 31, Year 1 Dec. 31, Year 2 (A) Beginning Balance of Lease Liability $75,100 48,614 25,000 (B) Debit Interest on Lease Liability 5.920% (A) S 0 2,878 1,480 $4,358 + Payments (C) Debit Lease Liability (0) (8) $26,486 23,608 25,006 $75, 100 (D) Credit Cash Lease Payment $26,486 26,486 26, 486 $79,458 Required: 1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability. 2. Prepare the January 1 journal entry to record the first $26,486 cash lease payment. (E) Ending Balance of Lease Liability (A) - (C) $48,614 25,006 0 3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (d) Year 3. 4. Prepare the December 31 journal entry to record the $26,486 cash lease payment at the end of (a) Year 1 and (b) Year 2.
Problem 10-12AC Accounting for Operating Lease LO On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a operating lease. The lease requires three $26,486 lease payments (the first at the beginning of the lease and the rest at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $75,100, using a 5.920% interest rate. The lease payment schedule follows. Date Jan. 1. Year 1 Dec. 31, Year 1 Dec. 31, Year 2 (A) Beginning Balance of Lease Liability $75,100 48,614 25,000 (B) Debit Interest on Lease Liability 5.920% (A) S 0 2,878 1,480 $4,358 + Payments (C) Debit Lease Liability (0) (8) $26,486 23,608 25,006 $75, 100 (D) Credit Cash Lease Payment $26,486 26,486 26, 486 $79,458 Required: 1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability. 2. Prepare the January 1 journal entry to record the first $26,486 cash lease payment. (E) Ending Balance of Lease Liability (A) - (C) $48,614 25,006 0 3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (d) Year 3. 4. Prepare the December 31 journal entry to record the $26,486 cash lease payment at the end of (a) Year 1 and (b) Year 2.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.5AP
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