a.
The classification of the lease for both lessee and lessor.
Given information:
Lease term is 9 years.
Lease doesn’t contain a transfer of ownership.
Lease doesn’t contain a purchase option.
Economic life of an asset is 9 years.
Fair value of the asset is $1,349,328.
Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.
Implicit interest rate is 8%
Annual lease payments are $200,000 due on Jan/1 each year
b.
To prepare: The amortization tables for the lease term.
Given information:
Lease term is 9 years.
Lease doesn’t contain a transfer of ownership.
Lease doesn’t contain a purchase option.
Economic life of an asset is 9 years.
Fair value of the asset is $1,349,328.
Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.
Implicit interest rate is 8%
Annual lease payments are $200,000 due on Jan/1 each year
c.
To prepare: The
Given information:
Lease term is 9 years.
Lease doesn’t contain a transfer of ownership.
Lease doesn’t contain a purchase option.
Economic life of an asset is 9 years.
Fair value of the asset is $1,349,328.
Cost of the asset is $1,300,000.
Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.
Implicit interest rate is 8%
Annual lease payments are $200,000 due on Jan/1 each year
d.
To prepare: The journal entries for the lessee for year one.
Given information:
Lease term is 9 years.
Lease doesn’t contain a transfer of ownership.
Lease doesn’t contain a purchase option.
Economic life of an asset is 9 years.
Fair value of the asset is $1,349,328.
Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.
Implicit interest rate is 8%
Annual lease payments are $200,000 due on Jan/1 each year

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