Problem 21-01 The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Concord Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $113,055 Residual value of equipment at end of lease term, guaranteed by the lessee $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $585,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 5,275.) CONCORD COMPANY (Lessee) Lease Amortization Schedule Date Annual Lease Payment Plus GRV Interest on Liability Reduction of Lease Liability Lease Liability 1/1/20 $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places 1/1/20 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 1/1/21 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 1/1/22 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 1/1/23 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 1/1/24 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 1/1/25 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 12/31/26 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places $enter a total amount $enter a total amount $enter a total amount Prepare all of the journal entries for the lessee for and to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. Date Account Titles and Explanation Debit Credit choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record the lease t enter an account title to record the lease (To record the lease.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record first lease payment enter an account title to record first lease payment (To record first lease payment.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record interest enter an account title to record interest (To record interest.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record amortization enter an account title to record amortization (To record amortization.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record second lease payment enter an account title to record second lease payment (To record second lease payment.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record interest enter an account title to record interest (To record interest.) choose a transaction date Jan. 1, 2020 During 2020 Dec. 31, 2020 Jan. 1, 2021 During 2021 Dec. 31, 2021 enter an account title to record amortization enter an account title to record amortization (To record amortization.) Suppose Concord received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $ Lease Liability $t What if Concord prepaid rent of $5,000 to Faldo? Right-of-use asset $ Lease Liability $
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