Recording Entries for Finance Lease-No Residual On January 1 of Year 1, Ashe Company entered into a five-year equipment lease (with no renewal options) requiring payments of $20,000, with the first payment due immediately. The lessor's implicit interest rate, known to Ashe, is 6%. Ownership of the equipment remains with the lessor at expiration of the lease. There is no option to purchase the property at the end of the lease term and the equipment is expected to have no residual value. The equipment has an estimated economic life of five years. a. How would Ashe Company classify the lease? Finance lease ✔ b. Prepare a schedule of the lease liability for the 5-year lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, Year 1 Jan. 1, Year 1 $ Jan. 1, Year 2 Jan. 1, Year 3 Jan. 1, Year 41 Jan. 1, Year 5 Total $ Lease Payment 0 x $ 0x 0x 0x ox Interest on Liability 0 $ Lease Liability Change 05 0x 0x 0x 0x 0 $ 0x 0x 0x 0 0 0 Lease Liability 0x 0x 0x 0 0 0
Recording Entries for Finance Lease-No Residual On January 1 of Year 1, Ashe Company entered into a five-year equipment lease (with no renewal options) requiring payments of $20,000, with the first payment due immediately. The lessor's implicit interest rate, known to Ashe, is 6%. Ownership of the equipment remains with the lessor at expiration of the lease. There is no option to purchase the property at the end of the lease term and the equipment is expected to have no residual value. The equipment has an estimated economic life of five years. a. How would Ashe Company classify the lease? Finance lease ✔ b. Prepare a schedule of the lease liability for the 5-year lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, Year 1 Jan. 1, Year 1 $ Jan. 1, Year 2 Jan. 1, Year 3 Jan. 1, Year 41 Jan. 1, Year 5 Total $ Lease Payment 0 x $ 0x 0x 0x ox Interest on Liability 0 $ Lease Liability Change 05 0x 0x 0x 0x 0 $ 0x 0x 0x 0 0 0 Lease Liability 0x 0x 0x 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
DO not give answer in image
![E
Recording Entries for Finance Lease-No Residual
On January 1 of Year 1, Ashe Company entered into a five-year equipment lease (with no renewal options)
requiring payments of $20,000, with the first payment due immediately. The lessor's implicit interest rate,
known to Ashe, is 6%. Ownership of the equipment remains with the lessor at expiration of the lease. There is
no option to purchase the property at the end of the lease term and the equipment is expected to have no
residual value. The equipment has an estimated economic life of five years.
a. How would Ashe Company classify the lease? Finance lease #
b. Prepare a schedule of the lease liability for the 5-year lease term.
• Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later
calculations in the schedule.
Date
Jan. 1, Year 1
Jan. 1, Year 1 $
Jan. 1, Year 2
Jan. 1, Year 31
Jan. 1, Year 4
Jan. 1, Year 5
Total
$
Lease
Payment
0 x $
0x
0x
0 x
0x
Interest
on Liability
0 $
Lease Liability
Change
0 $
0x
0x
0 x
0 x
0 $
0 x
0 x
0x
0
0
0
$
Lease
Liability
0x
0 x
0 x
0
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5ec586fb-947f-42bf-8462-e5aff0bd054c%2F47c53d52-f574-48d7-a321-89d341fdcf05%2F6c7ktvp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:E
Recording Entries for Finance Lease-No Residual
On January 1 of Year 1, Ashe Company entered into a five-year equipment lease (with no renewal options)
requiring payments of $20,000, with the first payment due immediately. The lessor's implicit interest rate,
known to Ashe, is 6%. Ownership of the equipment remains with the lessor at expiration of the lease. There is
no option to purchase the property at the end of the lease term and the equipment is expected to have no
residual value. The equipment has an estimated economic life of five years.
a. How would Ashe Company classify the lease? Finance lease #
b. Prepare a schedule of the lease liability for the 5-year lease term.
• Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later
calculations in the schedule.
Date
Jan. 1, Year 1
Jan. 1, Year 1 $
Jan. 1, Year 2
Jan. 1, Year 31
Jan. 1, Year 4
Jan. 1, Year 5
Total
$
Lease
Payment
0 x $
0x
0x
0 x
0x
Interest
on Liability
0 $
Lease Liability
Change
0 $
0x
0x
0 x
0 x
0 $
0 x
0 x
0x
0
0
0
$
Lease
Liability
0x
0 x
0 x
0
0
0
![c. Prepare the entries for Ashe on (1) January 1 to record commencement of the lease and the first lease
payment, and (2) December 31 to record the two year-end adjusting entries.
Note: Round your answers to the nearest whole dollar.
Date
Jan, 1
Jan. 1
Dec. 31
Dec. 31
Account Name
To record lease liability and right-of-use asset.
To record receipt of lease payment.
To record interest.
To record amortization.
Dr.
0
0
0
0
0
0
0
0
Cr.
0x
0x
0x
0x
0x
0x
0x
0x](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5ec586fb-947f-42bf-8462-e5aff0bd054c%2F47c53d52-f574-48d7-a321-89d341fdcf05%2Fnvb40f9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:c. Prepare the entries for Ashe on (1) January 1 to record commencement of the lease and the first lease
payment, and (2) December 31 to record the two year-end adjusting entries.
Note: Round your answers to the nearest whole dollar.
Date
Jan, 1
Jan. 1
Dec. 31
Dec. 31
Account Name
To record lease liability and right-of-use asset.
To record receipt of lease payment.
To record interest.
To record amortization.
Dr.
0
0
0
0
0
0
0
0
Cr.
0x
0x
0x
0x
0x
0x
0x
0x
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education