Refer to the lease details in Problem 14-11A. Assume that this lease is classified as an operating lease instead of a finance lease. Required 1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability. 2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment. 3. Prepare the December 31 journal entry to record amortization at the end of ( a ) Year 1, ( b ) Year 2, and ( c ) Year 3. 4. Prepare the December 31 journal entry to record the $18,000 cash lease payment at the end of ( a ) Year 1 and ( b ) Year 2.

Question

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Answer 1

Textbook Question

Chapter 14, Problem 12AP

Refer to the lease details in Problem 14-11A. Assume that this lease is classified as an operating lease instead of a finance lease.

Required

1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability.
2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment.
3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3.
4. Prepare the December 31 journal entry to record the $18,000 cash lease payment at the end of (a) Year 1 and (b) Year 2.

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

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Answer 2

Textbook Question

Chapter 14, Problem 12AP

Refer to the lease details in Problem 14-11A. Assume that this lease is classified as an operating lease instead of a finance lease.

Required

1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability.
2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment.
3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3.
4. Prepare the December 31 journal entry to record the $18,000 cash lease payment at the end of (a) Year 1 and (b) Year 2.

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

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Answer 3

Textbook Question

Chapter 14, Problem 12AP

Refer to the lease details in Problem 14-11A. Assume that this lease is classified as an operating lease instead of a finance lease.

Required

1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability.
2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment.
3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3.
4. Prepare the December 31 journal entry to record the $18,000 cash lease payment at the end of (a) Year 1 and (b) Year 2.

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

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Answer 4

Textbook Question

Chapter 14, Problem 12AP

Refer to the lease details in Problem 14-11A. Assume that this lease is classified as an operating lease instead of a finance lease.

Required

1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability.
2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment.
3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3.
4. Prepare the December 31 journal entry to record the $18,000 cash lease payment at the end of (a) Year 1 and (b) Year 2.

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 8

1.

Expert Solution

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

Prepare the journal entry at the start of the lease to record any asset or liability.

Answer 13

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry at the start of the lease to record any asset or liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Right-of- use Asset		51,000
	Lease Liability			51,000
	(To record the right of use asset and lease liability)

Table (1)

Description:

Right to use asset is an intangible asset and it is increased by $51,000. Therefore, it is debited by $51,000.
Lease Liability is a liability and it is increased by $51,000. Therefore, it is credited by $51,000.

Answer 14

2.

Expert Solution

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

To determine

Prepare the journal entry to record the first $18,000 cash lease payment.

Answer 19

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating leases: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the first $18,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		18,000
	Cash			18,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $18,000. Therefore, it is debited by $18,000.
Cash is an asset and it is decreased by $18,000. Therefore, it is credited by $18,000.

Answer 20

3. (a)

Expert Solution

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

Answer 21

3. (a)

Expert Solution

Answer 22

3. (a)

Expert Solution

Answer 23

Expert Solution

Answer 24

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1.

Answer 25

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
(a)
Year 1
December 31	Amortization expense		16,019
	Accumulated amortization – Right of use asset			16,019
	(To record the amortization on right of use asset)

Table (3)

December 31, Year 1: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,019. Therefore, it is debited by $16,109.
Accumulated amortization is a contra-asset account and it is increased by $16,019. Therefore, it is credited by $16,019.

Answer 26

3. (b)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

Answer 27

3. (b)

Expert Solution

Answer 28

3. (b)

Expert Solution

Answer 29

Expert Solution

Answer 30

To determine

Prepare the journal entry to record the straight-line amortization for Year 2.

Answer 31

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		16,981
	Accumulated amortization – Right of use asset			16,981
	(To record the amortization on right of use asset)

Table (4)

December 31, Year 2: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $16,981. Therefore, it is credited by $16,981.

Answer 32

3. (c)

Expert Solution

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 33

3. (c)

Expert Solution

Answer 34

3. (c)

Expert Solution

Answer 35

Expert Solution

Answer 36

To determine

Prepare the journal entry to record the straight-line amortization for Year 3.

Answer 37

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record the straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		18,000
	Accumulated amortization – Right of use asset			18,000
	(To record the amortization on right of use asset)

Table (5)

December 31, Year 3: To record the amortization on right of use asset:

Amortization expense (expense account) is a component of stockholders’ equity and it is increased by $18,000. Therefore, it is debited by $18,000.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 38

4. (a)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 39

4. (a)

Expert Solution

Answer 40

4. (a)

Expert Solution

Answer 41

Expert Solution

Answer 42

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 1.

Answer 43

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Interest expense		1,981
	Lease liability		16,019
	Cash			18,000
	(To record the lease payment for interest and lease liability)

Table (6)

December 31, Year 1: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,981. Therefore, it is debited by $1,981.
Lease Liability is a liability and it is decreased by $16,019. Therefore, it is debited by $16,019.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 44

4. (b)

Expert Solution

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 45

4. (b)

Expert Solution

Answer 46

4. (b)

Expert Solution

Answer 47

Expert Solution

Answer 48

To determine

Prepare the journal entry to record the lease payment for interest and lease liability for Year 2.

Answer 49

Explanation of Solution

Lease: It is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Operating lease: In an operating lease lessor retains all ownership risks and responsibilities.

Prepare the journal entry to record lease payment for interest and lease liability.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Interest expense		1,019
	Lease liability		16,981
	Cash			18,000
	((To record the lease payment for interest and lease liability)

Table (7)

December 31, Year 2: To record the lease payment for interest and lease liability:

Interest expense (expense account) is a component of stockholders’ equity and it is increased by $1,091. Therefore, it is debited by $1,091.
Lease Liability is a liability and it is decreased by $16,981. Therefore, it is debited by $16,981.
Accumulated amortization is a contra-asset account and it is increased by $18,000. Therefore, it is credited by $18,000.

Answer 50

Ch. 14 - A bond traded at 97 means that a. The bond pays...Ch. 14 - Prob. 2MCQ Ch. 14 - Prob. 3MCQ Ch. 14 - Prob. 4MCQ Ch. 14 - Prob. 5MCQ Ch. 14 - Prob. 1DQ Ch. 14 - Prob. 2DQ Ch. 14 - Prob. 3DQ Ch. 14 - Prob. 4DQ Ch. 14 - Prob. 5DQ

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