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Reporting Operating Lease—Lessee On January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $85,099, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $400,000 and a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor’s implicit rate is 7.5%, which is unknown to the lessee. The lessee’s incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease.  1. Prepare a schedule of the right-of-use asset for the 4-year lease term. -- Note: Round each amount in the schedule to the nearest whole dollar (attached in first picture) 2.  Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.’s accounting year ends December 31. -- Note: Round your answers to the nearest whole dollar. (attached in second picture)

Reporting Operating Lease—Lessee On January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $85,099, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $400,000 and a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor’s implicit rate is 7.5%, which is unknown to the lessee. The lessee’s incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease.  1. Prepare a schedule of the right-of-use asset for the 4-year lease term. -- Note: Round each amount in the schedule to the nearest whole dollar (attached in first picture) 2.  Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.’s accounting year ends December 31. -- Note: Round your answers to the nearest whole dollar. (attached in second picture)

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...
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Reporting Operating Lease—Lessee
On January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $85,099, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $400,000 and a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor’s implicit rate is 7.5%, which is unknown to the lessee. The lessee’s incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. 

1. Prepare a schedule of the right-of-use asset for the 4-year lease term. -- Note: Round each amount in the schedule to the nearest whole dollar (attached in first picture)

2.  Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.’s accounting year ends December 31. -- Note: Round your answers to the nearest whole dollar. (attached in second picture)

Lease Liability Schedule Date Jan. 1, Year 1 c. Prepare a schedule of the right-of-use asset for the 4-year lease term. • Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Year 1 $ Year 2 $ Year 3 $ Year 4 $ Total $ Lease Expense Right-of-Use Asset Schedule Interest on Liability 85,099✔ $ 85,099✔ $ 85,099✔ $ 85,099 $ 340,396 $ Right-of-Use Asset Change 0 x $ 0 x $ 0 x $ 0✔ $ 0 $ Journal Entries Right-of-Use Asset 304,407 $ 0 x $ 0 x $ 0 x $ 0 x $ 0 0 x 0 x O 0
Transcribed Image Text:Lease Liability Schedule Date Jan. 1, Year 1 c. Prepare a schedule of the right-of-use asset for the 4-year lease term. • Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Year 1 $ Year 2 $ Year 3 $ Year 4 $ Total $ Lease Expense Right-of-Use Asset Schedule Interest on Liability 85,099✔ $ 85,099✔ $ 85,099✔ $ 85,099 $ 340,396 $ Right-of-Use Asset Change 0 x $ 0 x $ 0 x $ 0✔ $ 0 $ Journal Entries Right-of-Use Asset 304,407 $ 0 x $ 0 x $ 0 x $ 0 x $ 0 0 x 0 x O 0
Lease Liability Schedule Right-of-Use Asset Schedule Journal Entries d. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.'s accounting year ends December 31. • Note: Round your answers to the nearest whole dollar. Date Jan. 1, Year 1 Jan. 1, Year 1 Dec. 31, Year 1 Jan. 1, Year 2 Dec. 31, Year 2 Account Name Right-of-Use Asset Lease Liability To record lease liability and right-of-use asset Lease Liability Cash To record lease payment Lease Expense Lease Liability Right-of-Use Asset To record lease expense Lease Liability Cash To record lease payment Lease Liability To record lease expense > < > > Dr. 304,407 0 85,099 0 0 0 0 85,099 0 0 0 0 Cr. 0 304,407 0 85,099 0 x 17,545 ✔ 0x 0 85,099 0 x 12,140✔ 0 x
Transcribed Image Text:Lease Liability Schedule Right-of-Use Asset Schedule Journal Entries d. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.'s accounting year ends December 31. • Note: Round your answers to the nearest whole dollar. Date Jan. 1, Year 1 Jan. 1, Year 1 Dec. 31, Year 1 Jan. 1, Year 2 Dec. 31, Year 2 Account Name Right-of-Use Asset Lease Liability To record lease liability and right-of-use asset Lease Liability Cash To record lease payment Lease Expense Lease Liability Right-of-Use Asset To record lease expense Lease Liability Cash To record lease payment Lease Liability To record lease expense > < > > Dr. 304,407 0 85,099 0 0 0 0 85,099 0 0 0 0 Cr. 0 304,407 0 85,099 0 x 17,545 ✔ 0x 0 85,099 0 x 12,140✔ 0 x
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I need the Right of Use Asset Ammortization table, not the lease liability amortization table. 

Lease Liability Schedule c. Prepare a schedule of the right-of-use asset for the 4-year lease term. • Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, Year 1 Year 1 $ Year 2 $ Year 3 $ Year 4 $ Total $ Lease Expense Right-of-Use Asset Schedule Journal Entries Interest on Liability $ 85,099 85,099 $ 85,099✔ $ 85,099 $ 340,396 $ Right-of-Use Asset Change 0 x $ 0 x $ 0 x $ 0✔ $ 0 $ Right-of-Use Asset $ * $ 0 x $ 0 x $ 0 x $ 0 304,407 0 x 0 x 0 0
Transcribed Image Text:Lease Liability Schedule c. Prepare a schedule of the right-of-use asset for the 4-year lease term. • Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, Year 1 Year 1 $ Year 2 $ Year 3 $ Year 4 $ Total $ Lease Expense Right-of-Use Asset Schedule Journal Entries Interest on Liability $ 85,099 85,099 $ 85,099✔ $ 85,099 $ 340,396 $ Right-of-Use Asset Change 0 x $ 0 x $ 0 x $ 0✔ $ 0 $ Right-of-Use Asset $ * $ 0 x $ 0 x $ 0 x $ 0 304,407 0 x 0 x 0 0
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