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 $4,500. 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.

Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Description Debit Credit Date 7/1/20 . 9/30/20 9/30/20 Interest expense 12/31/20 12/31/20 Interest expense Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Cash Finance Lease Liability Accumulated Amortization Interest Expense Amortization Expense Right-of-use Asset- Finance Lease Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Note:Use negative sign with your answers, when appropriate. Noncash Assets Balance Sheet Contra Assets Liabilities Contributed Capitals Earned Capital Income Statement Net Revenues Expenses Income Cash Asset 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