Homework Help is Here – Start Your Trial Now!
Business
Accounting
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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
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
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
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
steps

Step by step

Solved in 4 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting for Leases
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
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS