Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: The lease payments are $13,900 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,100 per year. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,600 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $10,000 if the lessee ends the lease at the end of the first lease term, and $3,300 if they end the lease at the end of the second lease term. The leased asset has a useful life of ten years and a fair value of $62,400. The interest rate implicit in the lease is 10%. (PV of S1, PVA of $1, and PVAD of S 1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset. (Round the intermediate and final answer to the nearest whole dollar amount.) 1-b. Record the initial journal entry. (If no entry is required for a transaction/ event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar amount.) 2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final answers to the nearest whole dollar amount.) 3. List the items that would appear in the lessee's SCI for the year ended 31 December 20 X3. (Round the intermediate and final answers to the nearest whole dollar amount.)
Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: The lease payments are $13,900 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,100 per year. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,600 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $10,000 if the lessee ends the lease at the end of the first lease term, and $3,300 if they end the lease at the end of the second lease term. The leased asset has a useful life of ten years and a fair value of $62,400. The interest rate implicit in the lease is 10%. (PV of S1, PVA of $1, and PVAD of S 1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset. (Round the intermediate and final answer to the nearest whole dollar amount.) 1-b. Record the initial journal entry. (If no entry is required for a transaction/ event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar amount.) 2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final answers to the nearest whole dollar amount.) 3. List the items that would appear in the lessee's SCI for the year ended 31 December 20 X3. (Round the intermediate and final answers to the nearest whole dollar amount.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: The lease payments are $13,900
per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,100 per
year. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance)
are $12,600 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $10,000 if the lessee ends
the lease at the end of the first lease term, and $3,300 if they end the lease at the end of the second lease term. The leased asset has a
useful life of ten years and a fair value of $62,400. The interest rate implicit in the lease is 10%. (PV of $1, PVA of $1, and PVAD of $
1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset. (Round the intermediate
and final answer to the nearest whole dollar amount.) 1 - b. Record the initial journal entry. (If no entry is required for a transaction/
event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest
whole dollar amount.) 2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final
answers to the nearest whole dollar amount.) 3. List the items that would appear in the lessee's SCI for the year ended 31 December 20
X3. (Round the intermediate and final answers to the nearest whole dollar amount.)
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