Problem 10-12AC Accounting for Operating Lease LO C3On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a operating lease. The lease requiresthree $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 presentvalue of the three annual lease payments is $75,100, using a 5.920% interest rate. The lease payment schedule follows.DateJan. 1, Year 1Dec. 31, Year 1Dec. 31, Year2Payments(C)DebitInterest onLeaseBeginning Balance Lease Liability Liability++11+of Lease Liability 5.920% (A)(0) (8)$26,4862,87823,60825,006$75, 100(A)$75,10048,61425,006(B)Debit1,480$4,358(D)CreditCash LeasePayment$26, 486Required: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.26,48626, 486$79,458(E)Ending Balanceof LeaseLiability(A) (C)$48,61425,00603. 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.

A journal entry is a record of a business transaction in your business books. In double-entry…

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.

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