Chapter 21, Problem 8P

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 find: To find the relationship between $550,000 and the lease agreement.

To determine

(b)

To record: To record the inception and payment of first installment.

To determine

(c)

To determine the cost of deprecation.

To determine

(d)

To determine the interest expense and record.

To determine

(e)

To record: To record the lease-related expenses in journal for the year 2018.

To determine

(f)

To record: To record the lease-related transactions in the balance sheet of L Company.