Chapter 21, Problem 3P

To determine

Lease: A contractual arrangement between the owner of the asset and the user of the asset for a fixed amount of money is termed lease. In this contract the owner of the asset permits the user to use the property for a fixed sum of money received at the time of handing over the asset. At the end of the contract tenure the user of the asset need to return the asset to the owner. The parties involved in the contract are termed the lessor the owner of the asset and the lessee the user of the asset.

(a)

To determine the type of lease.

To determine

(b)

To prepare: To prepare journal entry to record the inception of lease in the books of W.

To determine

(c)

To prepare: To prepare journal entry to record the inception of lease in the books of E.

To determine

(d)

To prepare: To prepare journal entry to record the lease-related expenses in the books of W and E.

To determine

(e)

To prepare: To prepare lease amortization schedule and record the same in the journal of E and W.

To determine

(f)

To show: To show how lease-related expenses are recorded in the balance sheet of W and E.