Rogers Company signs a five-year capital lease with Packer Company for office equipment. The annual lease payment is $ 10,000, and the interest rate is 8%.

Required

1. Compute the present value of Roger’s five-year lease payments.

2. Prepare the journal entry to record Roger’s capital lease at its inception.

3. Complete a lease payment schedule for the five years of the lease with the following headings. Assume that the beginning balance of the lease liability (present value of lease payments) is $ 79,854.

4. Use straight-line depreciation and prepare the journal entry to depreciate the leased asset at the end of year 1. Assume zero salvage value and a five- year life for the officeequipment.

Transcribed Image Text:

Period Ending Date Beginning Balance of Lease Liability Interest on Lease Liability Reduction of Lease Liability Cash Lease Payment Ending Balance of Lease Liability