Chapter 15, Problem 15.4DIE

(a)

To determine

Lease: A lease is contractual agreement in which the holder of assets called lessor gives authority to use the assets to another party called lessee against certain amount which should be paid regularly. It gives the right to use specific assets over the period of time in return for lease rental.

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: Journal entries

(b)

To determine

Debt to assets ratio at year end.