STerms of a lease agreement and related facts were as follows:a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value(straight-line depreciation).b. Annual lease payments at the beginning of each year were $20,873, beginning January 1.c. Lessor's implicit rate when calculating annual rental payments was 10%.d. Costs of $2,062 for legal fees for the lease execution were the responsibility of the lessor.Required:Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at theDecember 31 fiscal year-end under each of the following three independent assumptions:1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease).2. The lease term is six years and the lessor paid $100,000 to acquire the asset. Also assume that adjusting the leasereceivable (net investment) by initial direct costs reduces the effective rate of interest to 9%.3. The lease term is six years and the lessor paid $85,000 to acquire the asset.Complete this question by entering your answers in the tabs below.Required Required Required123The lease term is three years and the lessor paid $100,000 to acquire the asset (operatinglease) prepare the appropriate entries for the lessor to record the lease, the initial paymentat its beginning, and at the December 31 fiscal year-end.Note: If no entry is required for a transaction/event, select "No journal entry required" inthe first account field. Round your intermediate and final answers to nearest whole dollar.Show less▲No1DateJanuary 01 CashGeneral JournalDeferred lease revenue3Debit20,873Credit20,8732January 01Deferred lease revenue2,062Cash2,0623December 31 Depreciation expense16,667XAccumulated depreciation×16,667X4December 31 Deferred lease revenueLease revenue☑20,873X×20,873X5December 31××< Required 1Required 2 >

An agreement of contract that is prepared to transfer the right to use the resources for a…

Terms of a lease agreement and related facts were as follows: a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $20,873, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2,062 for legal fees for the lease execution were the responsibility of the lessor.

Terms of a lease agreement and related facts were as follows: a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $20,873, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2,062 for legal fees for the lease execution were the responsibility of the lessor.

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

S
Terms of a lease agreement and related facts were as follows:
a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value
(straight-line depreciation).
b. Annual lease payments at the beginning of each year were $20,873, beginning January 1.
c. Lessor's implicit rate when calculating annual rental payments was 10%.
d. Costs of $2,062 for legal fees for the lease execution were the responsibility of the lessor.
Required:
Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the
December 31 fiscal year-end under each of the following three independent assumptions:
1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease).
2. The lease term is six years and the lessor paid $100,000 to acquire the asset. Also assume that adjusting the lease
receivable (net investment) by initial direct costs reduces the effective rate of interest to 9%.
3. The lease term is six years and the lessor paid $85,000 to acquire the asset.
Complete this question by entering your answers in the tabs below.
Required Required Required
1
2
3
The lease term is three years and the lessor paid $100,000 to acquire the asset (operating
lease) prepare the appropriate entries for the lessor to record the lease, the initial payment
at its beginning, and at the December 31 fiscal year-end.
Note: If no entry is required for a transaction/event, select "No journal entry required" in
the first account field. Round your intermediate and final answers to nearest whole dollar.
Show less▲
No
1
Date
January 01 Cash
General Journal
Deferred lease revenue
3
Debit
20,873
Credit
20,873
2
January 01
Deferred lease revenue
2,062
Cash
2,062
3
December 31 Depreciation expense
16,667X
Accumulated depreciation
×
16,667X
4
December 31 Deferred lease revenue
Lease revenue
☑
20,873X
×
20,873X
5
December 31
×
×
< Required 1
Required 2 >

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