6 1 Problem 2. Following are the terms of a lease entered into on January 1, 2020. [LOJ 2 FMV of asset at inception of lease $500,000.00 3 Estimated residual value of asset at lease termination S80,000.00 Portion of residual value guaranteed by Lessee 50.00 5 Lessor's amortized cost of assetat inception of lease $500,000.00 Duration of lease 2 yrs 7 Lease payment amount $230,458.00 Frequency of payments annually 9 First payment due at inception of lease? Yes 10 Purchase option that Lessee is reasonably certain to exercise? No 11 Title transfers to Lessee at any time during or at end of lease? No 12 Lessor's implicit rate 12% 13 Lessee's incremental borrowing rate 12% 14 Does Lessee know Lessor's implicit rate? yes 15 Remaining economic life of asset 5 yes 16 Economie life of asset when new 5 yrs 17 Specialized use asset with no alternative use to Lessor at end of lease? no 18 Nonlease components included in lease payment? no 19 Initial direct costs incurred by Lessor (assume recorded by Lessor in Misc. 20 Expenses when incurred) none 21 Initial direct costs incurred by Leme (assume recorded by Lessor in Mise. 22 Expenses when incurred) none 23 Lessor's fiscal year end 12/31 24 Lessee's fiscal year end 12/31 25 Required 26 27 1. For the following lease, prepare amortization schedule and lease-related entries booked by Lessor and Lessce over the entire lease term. 20 31 Lessee's amortization schedule: 32 date pmt Interest principal balance 1/1/20 35 1/1/20 $230,458 36 12/31/20 $230,458 37 38 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 39 Entries by Lesset inception of lease on 1/1/2020: 40 41 Account Debit Credit 42 1 1 1 45 1 46 48 Entry by Lessor at inception of lease on 1/1/2020: 50 Account Debit Credit 2 2 54 55 Entries by Lessee at 12/31/2020 56 57 Account Debit Credit 3 59 60 61 52 3 3 65 66 Entries by Lessor at 12/31/2020: Debit Credit 4 4 4 4 68 Account 69 70 71 72 73 74 75 Entries by Lessee at 12/31/2021: 76 77 Account 78 Debit Credit 5 5 82 Entries by Lessoat 12/31/2021: 83 Account 85 Debit Credit 6 86 6 37 88 R9 90 91 1 Columni 2 Accumulated epreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B. 1. Sht) 6 Lease payable (Bal. Sht) 7 Lease receivalle (Bal. Sht) 8 Note payable Bal. Sht) 9 Prepaid service contract (Bal. Sht) 10 Right-of-Use asset (Bal. Sht) 11 Warehouse (ebl. Sht) 12 Amortization xpense (Inc. Stmt) 13 Cost of goods sold (Inc. Stmt) 14 Gain on sale of warehouse (Inc. Stmt) 15 Interest experse (Inc. Stmt) 16 Interest revenue (Inc. Stmt) 17 Lease expense (Inc. Stmt) 18 Lease revenue (Inc. Stmt) 19 Misc. expenses (Inc. Stmt) 20 Rent revenue Inc. Stmt) 21 Sales revenue inc. Stmt) 22 23 24 25 26 27 28 29 30 31 32 33 P3 P4 P5 P6 P7 P Ready 6 1 Problem 2. Following are the terms of a lease entered into on January 1, 2020. [LOJ 2 FMV of asset at inception of lease $500,000.00 3 Estimated residual value of asset at lease termination S80,000.00 Portion of residual value guaranteed by Lessee 50.00 5 Lessor's amortized cost of assetat inception of lease $500,000.00 Duration of lease 2 yrs 7 Lease payment amount $230,458.00 Frequency of payments annually 9 First payment due at inception of lease? Yes 10 Purchase option that Lessee is reasonably certain to exercise? No 11 Title transfers to Lessee at any time during or at end of lease? No 12 Lessor's implicit rate 12% 13 Lessee's incremental borrowing rate 12% 14 Does Lessee know Lessor's implicit rate? yes 15 Remaining economic life of asset 5 yes 16 Economie life of asset when new 5 yrs 17 Specialized use asset with no alternative use to Lessor at end of lease? no 18 Nonlease components included in lease payment? no 19 Initial direct costs incurred by Lessor (assume recorded by Lessor in Misc. 20 Expenses when incurred) none 21 Initial direct costs incurred by Leme (assume recorded by Lessor in Mise. 22 Expenses when incurred) none 23 Lessor's fiscal year end 12/31 24 Lessee's fiscal year end 12/31 25 Required 26 27 1. For the following lease, prepare amortization schedule and lease-related entries booked by Lessor and Lessce over the entire lease term. 20 31 Lessee's amortization schedule: 32 date pmt Interest principal balance 1/1/20 35 1/1/20 $230,458 36 12/31/20 $230,458 37 38 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 39 Entries by Lesset inception of lease on 1/1/2020: 40 41 Account Debit Credit 42 1 1 1 45 1 46 48 Entry by Lessor at inception of lease on 1/1/2020: 50 Account Debit Credit 2 2 54 55 Entries by Lessee at 12/31/2020 56 57 Account Debit Credit 3 59 60 61 52 3 3 65 66 Entries by Lessor at 12/31/2020: Debit Credit 4 4 4 4 68 Account 69 70 71 72 73 74 75 Entries by Lessee at 12/31/2021: 76 77 Account 78 Debit Credit 5 5 82 Entries by Lessoat 12/31/2021: 83 Account 85 Debit Credit 6 86 6 37 88 R9 90 91 1 Columni 2 Accumulated epreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B. 1. Sht) 6 Lease payable (Bal. Sht) 7 Lease receivalle (Bal. Sht) 8 Note payable Bal. Sht) 9 Prepaid service contract (Bal. Sht) 10 Right-of-Use asset (Bal. Sht) 11 Warehouse (ebl. Sht) 12 Amortization xpense (Inc. Stmt) 13 Cost of goods sold (Inc. Stmt) 14 Gain on sale of warehouse (Inc. Stmt) 15 Interest experse (Inc. Stmt) 16 Interest revenue (Inc. Stmt) 17 Lease expense (Inc. Stmt) 18 Lease revenue (Inc. Stmt) 19 Misc. expenses (Inc. Stmt) 20 Rent revenue Inc. Stmt) 21 Sales revenue inc. Stmt) 22 23 24 25 26 27 28 29 30 31 32 33 P3 P4 P5 P6 P7 P Ready