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: $115,487 due at each year-end. Upfront fees: $10,000 paid in cash. Required Note: For the following questions, round your answers to the nearest whole dollar. a. Explain how the facts support the classification of the lease as an operating lease. Value of the leased asset is not being conveyed to CCH = b. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. $ 0 X C. 1. What amount will be added to the balance sheet as an asset? $ 0 2. What will CCH Corporation call the asset on the balance sheet? Right-of-use asset d. Prepare a lease amortization schedule that shows the interest and principal portions of each lease payment. 0x $ Ox $ 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) 19 Ox $ OX 2 OX 0 X OX OX 3 OX OX OX 4 OX OX OX 5 OX 0X OX 0 OX e. 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 (s in millions) Transaction Income Statement Revenues Liabilities Contrib. Capital Expenses Earned Capital Net Income 0 (a) 0- 0 OVE Balance Sheet Cash Noncash Assets Asset OX Cash N/A XNIA OX OX Cash N/A X N/A OX Cash + N/A XN/A N/A (b) OX X OX X OX X 0 N/A 0 : N/A 0 N/A 0 0 N/A OX XN/A OX XN/A 0 N/A 0 N/A 0 N/A N/A OX= # X OX * (c) OX- OX N/A f. 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 0X 2022 0X 2023 OX 2024 OX 2025 0 Thereafter 07 Total undiscontinued lease payments 0 x Imputed interest 0X $ 0X Total Operating lease liability Weighted average remaining lease life in years 0X Weighted average discount rate 0% x
