Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:

1.	The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $20,000 to be paid in advance at the beginning of each year.
2.	The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is $68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time.
3.	Adden agrees to pay all executory costs directly to a third party.
4.	The lease contains no renewal or bargain purchase options.
5.	Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate.
6.	Adden uses the straight-line method to record depreciation on similar equipment.
7.	Executory costs paid at the end of the year by Adden are:

2019	2020
Insurance, $1,500	Insurance, $1,300
Property taxes, $5,500	Property taxes, $6,000

Required:

1.	Next Level Determine what type of lease this is for Adden.
2.	Prepare a table summarizing the lease payments and interest expense for Adden.
3.	Prepare journal entries for Adden for the years 2019 and 2020.

. Prepare a table summarizing the lease payments and interest expense for Adden.

Additional Instructions

Score: 17/21

Adden Company

Summary of Lease Payments and Interest Expense

1	Date	Annual Lease Payment	Interest at 12% on Unpaid Liability	Balance of Lease Liability
2	January 1, 2019 : Before the initial payment
3	January 1, 2019
4	December 31, 2019
5	January 1, 2020
6	December 31, 2020
7	January 1, 2021
8	December 31, 2021
9	January 1, 2022

. Prepare journal entries for Adden for the year 2019.

General Journal Instructions

Question not attempted.

PAGE 1

GENERAL JOURNAL

Score: 0/138

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Points:

0 / 27

Feedback

Check My Work

Record the lease and first payment in separate entries on January 1. Use the Summary of Lease Payments and Interest Expense Schedule to record payments and interest expense on the appropriate dates. Amortize the right-of-use asset using the straight-line method and remember to record insurance and property tax expense at the end of each year.

3b. Prepare journal entries for Adden for the year 2020.

General Journal Instructions

Question not attempted.

PAGE 1

GENERAL JOURNAL

Score: 0/113

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9