Accounting for Leases On January 3, 2020, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $12,000 with the first payment due December 31,2020. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Prepare the journal entries that Hanna Corporation would make on January 3 and December 31, 2020, to record this lease assuming. i. the lease is reported as an operating lease. b. Post the journal entries of part a to the appropriate T-accounts. C. Show how the entries posted in part b would affect the financial statements using the financial statement effects template. Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Debit Credit 57,198 0 . O 57,198 i. The lease is reported as an operating lease. Date Description 1/3/19 Right-of-use asset - operating lease Operating lease liability 12/31/19 Operating lease liability Cash 12/31/19 Operating lease expense Right-of-use asset - operating lease Operating lease liability A 4,004 * 0 0 4,004 x 12,000 0 . 0 4,004 x 7,996 x 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template i. the lease is reported as an operating lease. Operating Lease Liability 7,996 x 57,198 0 7,996 x Cash Right-of-use Asset-Operating Lease 57,198 0 x 0 12,000 Lease Expense 12,000 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Note: Use negative signs with your answers, when appropriate. i. the lease is reported as an operating lease. Balance Sheet Income Statement Noncash Net Contra Assets Cash Asset Assets Liabilities Contributed Capital 0 Earned Capital 0 Revenues Income Expenses 0 0 57,198 0 57,198 0 0 Transactions Operating leasecommences. Lease payment. Record leaseexpense andchanges to assetand liability. (12,000) 0 0 0 x 0 0 0 0 0 0 0 x O 4,004 0 0 x O 0 x 0 x Accounting for Leases On January 3, 2020, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $12,000 with the first payment due December 31,2020. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Prepare the journal entries that Hanna Corporation would make on January 3 and December 31, 2020, to record this lease assuming. i. the lease is reported as an operating lease. b. Post the journal entries of part a to the appropriate T-accounts. C. Show how the entries posted in part b would affect the financial statements using the financial statement effects template. Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Debit Credit 57,198 0 . O 57,198 i. The lease is reported as an operating lease. Date Description 1/3/19 Right-of-use asset - operating lease Operating lease liability 12/31/19 Operating lease liability Cash 12/31/19 Operating lease expense Right-of-use asset - operating lease Operating lease liability A 4,004 * 0 0 4,004 x 12,000 0 . 0 4,004 x 7,996 x 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template i. the lease is reported as an operating lease. Operating Lease Liability 7,996 x 57,198 0 7,996 x Cash Right-of-use Asset-Operating Lease 57,198 0 x 0 12,000 Lease Expense 12,000 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Note: Use negative signs with your answers, when appropriate. i. the lease is reported as an operating lease. Balance Sheet Income Statement Noncash Net Contra Assets Cash Asset Assets Liabilities Contributed Capital 0 Earned Capital 0 Revenues Income Expenses 0 0 57,198 0 57,198 0 0 Transactions Operating leasecommences. Lease payment. Record leaseexpense andchanges to assetand liability. (12,000) 0 0 0 x 0 0 0 0 0 0 0 x O 4,004 0 0 x O 0 x 0 x