B E D 1 Lessor leases asset to Lessee on 1/1/2020. Lease term is 5 years. Lease payment is $112,600/year with the 2 first payment due at the inception of the lease. Lessor's implicit rate is 12%/year and this rate is known by 3 Lessee. 4 At the end of the initial 5 year term, Lessee has the option to renew the lease for another 3 years with the 5 same lease payment. 6 Various present value calculations are below. 7 8 Calculated Present Value Calculation Value O $112,600 x present value of annuity due[i-12, n=3] $302,899.63 1 $112,600 x present value of annuity due[i=.12, n=5] $454,605.61 2 $112,600 present value of annuity due[i=12, n=8] $626,479.38 3 4 5 6 7 1. Prepare Lessee's entries on 1/1/2020 related to this transaction. Assume that on 1/1/2020, it is NOT 8 reasonably certain that the Lessee will exercise the renewal option at the end of the 5 year initial lease 9 term. Enter the entry in the spaces below. 0 1 2 Account Debit Credit 3 4 5 6 7 1 1 1 1 28 2. Prepare Lessee's entries on 1/1/2020 related to this transaction. Assume that on 1/1/2020, it is 29 reasonably certain that the Lessee will exercise the renewal option at the end of the 5 year initial lease 30 term. Enter the entry in the spaces below. 31 32 Account Debit Credit 33 34 35 36 37 38 39 2 2 2 2 40 41 Paste B 1 4 X fx Column1 A B D E F F Column1 Accumulated lepreciation (Bal. Sht) Cash (Bal. Sht Deferred rent revenue (Bal. Sht) Equipment (B1. Sht) Lease payable (Bal. Sht) Lease receivatlle (Bal. Sht) 3 Note payable Bal. Sht) Prepaid service contract (Bal. Sht) LO Right-of-Use asset (Bal. Sht) -1 Warehouse (ehl. Sht) 12 Amortization Expense (Inc. Stmt) 13 Cost of goods sold (Inc. Stmt) 14 Gain on sale of warehouse (Inc. Stmt) 15 Interest experse (Inc. Stmt) 16 Interest revenue (Inc. Stmt) 17 Lease expense (Inc. Stmt) 18 Lease revenue (Inc. Stmt) 19 Misc. expenses (Inc. Stmt) 20 Rent revenue Inc. Stmt) 21 Sales revenue Inc. Stmt) 22 23 24 25 26 27 28 29 30