b. Prepare the lease amortization schedule(s) for Donahue for all 4 years of the lease. the measurement of the lease liability and right-of-use asset be affected it, as a result of the lease contract, Moeller was also required to pay $500 in commissions, prepay $750 in addition to the first rental payment, and pay $200 of insurance each year? d. Suppose, instead of a 3-year lease term, Moeller and Kaluzniak agree to a one-year lease with a pay- ment of $1,137 at the start of the lease. Prepare all necessary journal entries for Moeller in 2020. E21.20 (LO 3,4) (Accounting for an Operating Lease) Use the information for Kaluzniak Corpo- ration and Moeller, Inc. from E21.19. Instructions a. Explain (and show calculations) how Kaluzniak arrived at the amount of the rental payments used in the lease agreement. b. Prepare the entries for Kaluzniak for 2020. c. How would Kaluzniak's accounting in part a change if it incurred legal fees of $700 to execute the lease documents and $500 in advertising expenses for the year in connection with the lease? E21.21 (LO 3, 4) (Accounting for an Operating Lease) Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Instructions a. Describe the nature of the lease to both Rauch and Donahue. tries for Donahue for 2020 and 21 b. Prepare the lease amortization schedule(s) for Donahue for all 4 years of the lease. the measurement of the lease liability and right-of-use asset be affected it, as a result of the lease contract, Moeller was also required to pay $500 in commissions, prepay $750 in addition to the first rental payment, and pay $200 of insurance each year? d. Suppose, instead of a 3-year lease term, Moeller and Kaluzniak agree to a one-year lease with a pay- ment of $1,137 at the start of the lease. Prepare all necessary journal entries for Moeller in 2020. E21.20 (LO 3,4) (Accounting for an Operating Lease) Use the information for Kaluzniak Corpo- ration and Moeller, Inc. from E21.19. Instructions a. Explain (and show calculations) how Kaluzniak arrived at the amount of the rental payments used in the lease agreement. b. Prepare the entries for Kaluzniak for 2020. c. How would Kaluzniak's accounting in part a change if it incurred legal fees of $700 to execute the lease documents and $500 in advertising expenses for the year in connection with the lease? E21.21 (LO 3, 4) (Accounting for an Operating Lease) Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Instructions a. Describe the nature of the lease to both Rauch and Donahue. tries for Donahue for 2020 and 21
