Accounting for Leases

On July $1,$ Shro$$ Company leased a warehouse building under a $10-$year lease agreement. The lease requires quarterly lease payments of $$5,000.$ The $$rst lease payment is due on September $30,2020.$ The lease was reported as a $$nance lease using an $8\%$ annual interest rate.

Prepare the journal entries for parts a and b$,$ and $(2)$ post to the appropriate T$-$accounts.

a$.$ To record the commencement of the lease on July $1.$

b$.$ To record what would be necessary on September $30$ and December $31.$

$1.$

a$.$

Date Account Debit Credit

Jul. $1$

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To record the start of the finance lease.

b$.$

Date Account Debit Credit

Sep. $30$

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To record the amortization of leased asset.

Sep. $30$

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To record the lease payment.

Dec. $31$

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To record the amortization of leased asset.

Dec. $31$

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To record the lease payment.

$2.$

Cash

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Right$-$of$-$use Asset$$Finance Lease

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Accumulated Amortiz.$$Finance Lease

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Finance Lease Liability

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Interest Expense

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Amortiz. Expense$$Finance Lease

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