Problem 3 – Leases Part I: Capital lease amortization and journal entries Hughey Co. as lessee records a finance lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value). Instructions (Round to the nearest dollar.) – Required in Excel Format (a) Prepare an amortization table for 2018 and 2019. (b) Prepare all of Hughey’s journal entries for 2018 and 2019. Part II: Operating lease amortization and journal entries Hughey Co. as lessee records an operating lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value). Note: The data is the same as Part I, but consider it as an operating lease. Instructions (Round to the nearest dollar.) - Required in Excel Format (a) Prepare an amortization table for 2018 and 2019. (b) Prepare all of Hughey’s journal entries for 2018 and 2019.

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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Problem 3 – Leases

Part I: Capital lease amortization and journal entries

Hughey Co. as lessee records a finance lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value).

Instructions (Round to the nearest dollar.) – Required in Excel Format

(a) Prepare an amortization table for 2018 and 2019.

(b) Prepare all of Hughey’s journal entries for 2018 and 2019.

Part II: Operating lease amortization and journal entries

Hughey Co. as lessee records an operating lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value).

Note: The data is the same as Part I, but consider it as an operating lease.

Instructions (Round to the nearest dollar.) - Required in Excel Format

(a) Prepare an amortization table for 2018 and 2019.

(b) Prepare all of Hughey’s journal entries for 2018 and 2019.

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