Accounting for Leases

On July 1, 2020, Shroff Company leased a warehouse building under a 10-year lease agreement. The lease requires quarterly lease payments of $7,500. The first lease payment is due on September 30, 2020. The lease was reported as a finance lease using an 8% annual interest rate.

a. Prepare the journal entry to record the commencement of the lease on July 1, 2020. b. Prepare the journal entries that would be necessary on September 30 and December 31, 2020. c. Post the entries from parts a and b in their appropriate T-accounts. d. Prepare a financial statement effects template to show the effects template to show the effects of the entries from parts a and b on the balance sheet and income statement.

Debit Credit 0 0 0 0 - 0 0 0 0 Date Description 7/1/20 Right-of-use lease asset - finance lease Finance lease liability 9/30/20 Finance lease liability Cash 9/30/20 Interest expense Amortization expense finance lease Accumulated amortization - finance lease 12/31/20 Finance lease liability Cash 0 0 0 0 0 0 0 0 0 0 0 0 12/31/20 Interest expense Amortization expense finance lease Accumulated amortization - finance lease 0 0 0 0 0 O Cash 0 O O 0 Accumulated Amortization Finance Lease Liability 0 0 0 O O 0 0 0 Right-of-use Asset- Finance Lease Interest Expense 0 o o o o 0 0 0 Amortization Expense 0 0 0 0 Balance Sheet Income Statement Net Noncash Assets Contra Assets Cash Asset Liabilities Contributed Capitals 0 Earned Capital 0 Revenues Income Expenses 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Transactions 7/1: Finance lease commences. 9/30: Amortization on leased asset. 9/30: Made quarterly lease payment. 12/31: Amortization on leased asset. 12/31: Made quarterly lease payment. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0