Applying New Lease Accounting Standards for Operating Leases On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. The company has a 5% cost of debt capital.

Leased asset: Office space.

Lease term: 5 years.

Annual lease payment: $161,682 due at each year-end.

Upfront fees: $10,000 paid in cash.

A. Prepare a lease amortization schedule that shows the interest and principal portions of each lease payment.

		Implicit Interest	Lease Amortization	Lease Liability, End
	Lease Liability,	(Lease Liability,	(Lease payment	(Lease Liability, Start
Year	Start	Start x 5%)	Implicit interest)	Lease Amortization)
1	Answer	Answer	Answer	Answer
2	Answer	Answer	Answer	Answer
3	Answer	Answer	Answer	Answer
4	Answer	Answer	Answer	Answer
5	Answer	Answer	Answer	Answer

B. At the end of the current year, what additional disclosure would CCH make in its footnotes pertaining to the four remaining lease payments?

	December 2020
2021	Answer
2022	Answer
2023	Answer
2024	Answer
2025	Answer
Thereafter	Answer
Total undiscontinued lease payments	Answer
Imputed interest	Answer
Total Operating lease liability	Answer
Weighted average remaining lease life in years	Answer
Weighted average discount rate	Answer

C. Use the financial statement effects template to record (a) the lease inception and (b) lease payment for year one and for (c) year two of the lease term. Also show the asset and lease amortization for those same two years. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount.

($ in millions)	Balance Sheet									Income Statement
Transaction	Cash	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned	Revenues		Expenses	=	Net
	Asset								Capital					Income
(a)	Answer		Answer	=	Answer		Answer		Answer	Answer		Answer	=	Answer
	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A
(b)	Answer		Answer	=	Answer		Answer		Answer	Answer		Answer	=	Answer
	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A
(c)	Answer		Answer	=	Answer		Answer		Answer	Answer		Answer	=	Answer
	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A	AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A		AnswerAccounts payableCashLease assetLease liabilityRent expenseRent revenueRetained earningsRight-of-use assetN/A