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

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

The following information relates to an equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $56,000 Lease term, 5 years Economic life of property, 6 years Implicit interest rate, 7% Annual lease payment due on December 31, $13,200 The equipment reverts back to the lessor at the end of the lease term. How much is recorded as the lease liability on the lease inception date? Select one: a. $66,000 b. $56,000 c. $57,911 d. $54,123

Applying New Lease Accounting Standards for Operating Leases On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. Details of lease contract Leased asset Office space Lease term 5 years Annual lease payment $115,487 Upfront fees $10,000 Cost of debt capital 5% a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. Amount of lease liability b. What amount will be added to the balance sheet as an asset? Amount added as an asset The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!!

A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Determine the present value of the lease upon the lease's inception. Create a partial amortization table through the second payment on January 1, Year 2. If the lessee’s fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Answer 2

Question

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 6

Chapter 14, Problem 12BP

1.

To determine

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

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

Answer 7

Chapter 14, Problem 12BP

1.

To determine

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

Answer 8

1.

Expert Solution

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		39,000
	Lease Liability			39,000
	(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 $39,000. Therefore, it is debited by $39,000.
Lease Liability is a liability and it is increased by $39,000. Therefore, it is credited by $39,000.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 13

2.

To determine

Prepare the journal entry to record the first $14,000 cash lease payment.

Answer 14

2.

Expert Solution

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 $14,000 cash lease payment.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
January 1	Lease Liability		14,000
	Cash			14,000
	(To record the first payment of lease for cash)

Table (2)

Description:

Lease Liability is a liability and it is decreased by $14,000. Therefore, it is debited by $14,000.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

Answer 19

3

(a)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

Answer 20

3

(a)

Expert Solution

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 straight-line amortization for Year 1.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 1
December 31	Amortization expense		12,025
	Accumulated amortization – Right of use asset			12,025
	(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 $12,025. Therefore, it is debited by $12,025.
Accumulated amortization is a contra-asset account and it is increased by $12,025. Therefore, it is credited by $12,025.

Answer 21

3

(a)

Expert Solution

Answer 22

3

(a)

Expert Solution

Answer 23

Expert Solution

Answer 24

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

Answer 25

(b)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

Answer 26

(b)

Expert Solution

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 straight-line amortization for Year 2.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 2
December 31	Amortization expense		12,975
	Accumulated amortization – Right of use asset			12,975
	(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 $12,975. Therefore, it is debited by $12,975.
Accumulated amortization is a contra-asset account and it is increased by $12,975. Therefore, it is credited by $12,975.

Answer 27

(b)

Expert Solution

Answer 28

(b)

Expert Solution

Answer 29

Expert Solution

Answer 30

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

Answer 31

(c)

To determine

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

Answer 32

(c)

Expert Solution

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 straight-line amortization for Year 3.

Date	Account Titles and Explanation	Post Ref.	Debit ($)	Credit ($)
Year 3
December 31	Amortization expense		14,000
	Accumulated amortization – Right of use asset			14,000
	(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 $14,000. Therefore, it is debited by $14,000.
Accumulated amortization is a contra-asset account and it is increased by $14,000. Therefore, it is credited by $14,000.

Answer 33

(c)

Expert Solution

Answer 34

(c)

Expert Solution

Answer 35

Expert Solution

Answer 36

4

(a)

To determine

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

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 37

4

(a)

To determine

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

Answer 38

4

(a)

Expert Solution

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		1,975
	Lease liability		12,025
	Cash			14,000
	(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 $1,975. Therefore, it is debited by $1,975.
Lease Liability is a liability and it is decreased by $12,025. Therefore, it is debited by $12,025.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 39

4

(a)

Expert Solution

Answer 40

4

(a)

Expert Solution

Answer 41

Expert Solution

Answer 42

(b)

To determine

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

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 43

(b)

To determine

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

Answer 44

(b)

Expert Solution

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		1,025
	Lease liability		12,975
	Cash			14,000
	((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 $1,025. Therefore, it is debited by $1,025.
Lease Liability is a liability and it is decreased by $12,975. Therefore, it is debited by $12,975.
Cash is an asset and it is decreased by $14,000. Therefore, it is credited by $14,000.

Answer 45

(b)

Expert Solution

Answer 46

(b)

Expert Solution

Answer 47

Expert Solution

Answer 48

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

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

Concept explainers

Videos

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

Explanation of Solution

Prepare the journal entry to record the first $14,000 cash lease payment.

Explanation of Solution

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 1.

Explanation of Solution

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 2.

Explanation of Solution

Prepare the journal entry to record straight-line amortization with zero salvage value at the end for Year 3.

Explanation of Solution

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

Explanation of Solution

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

Explanation of Solution

Want to see more full solutions like this?

Chapter 14 Solutions