Question
Beachmont Restaurants, Inc. enters into a lease for standard stoves and grills. The lease term is 3 years with no renewal or purchase options. There
Beachmont Restaurants, Inc. enters into a lease for standard stoves and grills. The lease term is 3 years with no renewal or purchase options. There is no residual value guarantee, and the lease terms do not provide for a transfer of title. The economic life of the asset is 10 years. According to the terms of the lease contract, Beachmont is required to pay rentals of $700 for the first year with payments increasing by 15% per year for Years 2 and 3. All lease payments are made on January 1. The implicit rate in the lease is 6%. The fair value of the assets is $9,000. Beachmont knows the lessor's implicit rate. Beachmont's fiscal year ends on December 31.
Determine the value of the right to use asset and lease liability at commencement of the lease
For the lease expense recognized each year, determine the amount of interest and amortization that are included in each year's expense.
Payment for Year 1$700.00
Payment for Year 2 (700+(700*15%)$805.00
Payment for Year 3 (805+(805*15%)$925.75
DatePayment No.Payment Discount rate@6% Present value
Jan 1, Year 11$ 700.001.00000$700.000
Jan 1, Year 22$ 805.000.94340$759.434
Jan 1, Year 33$ 925.750.89000$823.914
Value of the right to use asset and lease liability at the commencement of the lease$ 2,283.35Lease amortization table - lesseeDateBeginning balance of lease payableLease paymentInterest expense (beginning balance of lease payable *11% )Reduction in lease payable (lease payment - interest expense)Ending balance of lease payable (beginning balance of lease payable - reduction in lease payable)
Jan 1, Year 1$ 2,283.35$ 700.00$700.00$1,583.35
Jan 1, Year 2$ 1,583.35$ 805.00$95.00$710.00$873.35
Jan 1, Year 3$873.35$ 925.75$52.40$873.35$0.00
DateAmount of interestAmount of amortization
Jan 1, Year 1$-$ 700.00
Jan 1, Year 2$95.00$ 710.00
Jan 1, Year 3$52.40$ 873.35
I have the answers but dont know to set up excel to use in future problems. Please show all work.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started