Question 2Wang Enterprises Inc leased an asset on January 1, 2016. The lease ends on December 31, 2020.Term of the lease:5 years$37,000.00$30,000.00$52,000.00The annual lease payments are:The lease payments are due at the start of the period.Wang can purchase the asset at the end of the lease for:Expected fair value of asset at end of lease:The machine has an estimated useful life of:After which it is estimated the asset will have zero salvage value.Wang depreciates all its operating assets on a straight-line basis.The lessor's implicit rate of return from the lease is:(Which is less than the firm's implied cost of debt)Requirements:7 years7.00%1) Calculate the amount Wang should record as a leased asset and lease liability.2) Prepare an amortization schedule to show the pattern of interest expense over the 3 year lease.3) Show all of the journal entries recorded by Wang that relate to this leased asset in years 2016 and 2017.

SOLUTION:- 1. Present value of lease payments = Annual lease payments X Annuity factor for rate of…

Requirements: 1) Calculate the amount Wang should record as a leased asset and lease liability. 2) Prepare an amortization schedule to show the pattern of interest expense over the 3 year lease. 3) Show all of the journal entries recorded by Wang that relate to this leased asset in years 2016 and 2017.

Requirements: 1) Calculate the amount Wang should record as a leased asset and lease liability. 2) Prepare an amortization schedule to show the pattern of interest expense over the 3 year lease. 3) Show all of the journal entries recorded by Wang that relate to this leased asset in years 2016 and 2017.

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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