a.
The classification of a lease for the lessee.
Given information:
Lease term is 5 years.
Economic life of equipment is 5 years.
Contract does not contain a purchase option.
Fair value of the asset is $275,000.
Implicit interest rate is 5%
Annual lease payments are $57,900 due on Jan/1 each year.
b.
To prepare: The journal entries for the lessee for the commencement of the lease and for the first payment.
Given information:
The lease term is 5 years.
Economic life of equipment is 5 years.
Contract does not contain a purchase option.
Fair value of the asset is $275,000.
Implicit interest rate is 5%
Annual lease payments are $57,900 due on Jan/1 each year.
c.
To prepare: The amortization tables for the finance lease transactions.
Given information:
Lease term is 5 years.
Economic life of equipment is 5 years.
Contract does not contain a purchase option.
Fair value of the asset is $275,000.
Implicit interest rate is 5%
Annual lease payments are $57,900 due on Jan/1 each year.
d.
To prepare: The journal entries for the lessee for the end of year one and for the second year payment.
Given information:
Lease term is 5 years.
Economic life of equipment is 5 years.
Contract does not contain a purchase option.
Fair value of the asset is $275,000.
Implicit interest rate is 5%
Annual lease payments are $57,900 due on Jan/1 each year.
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