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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 10-12AC Accounting for Operating Lease LO C3
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
Payments
(C)
Debit
Interest on
Lease
Beginning Balance Lease Liability Liability
++11+
of Lease Liability 5.920% (A)
(0) (8)
$26,486
2,878
23,608
25,006
$75, 100
(A)
$75,100
48,614
25,006
(B)
Debit
1,480
$4,358
(D)
Credit
Cash Lease
Payment
$26, 486
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.
26,486
26, 486
$79,458
(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.
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