Question
Cheyenne Incorporated leases a piece of equipment to Sage Hill Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,590
Cheyenne Incorporated leases a piece of equipment to Sage Hill Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,590 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 $24,000, a book value of $19,000, and both parties expect a residual value of $8,400 at the end of the lease term, though this amount is not guaranteed. Cheyenne set the lease payments with the intent of earning a 5% return, and Sage Hill 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.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Prepare the lease amortization schedule(s) for Sage Hill for all 4 years of the lease.
SAGE HILL CORPORATION Lease Amortization Schedule Annuity-Due Basis | ||||||||
Date | Annual Payment | Interest on Liability | Reduction of Lease Liability | Lease Liability | ||||
1/1/20 | $ | $ | $ | $ | ||||
1/1/20 | ||||||||
1/1/21 | ||||||||
1/1/22 | ||||||||
1/1/23 |
Lease Expense Schedule | ||||||||
Date | Lease Expense (Straight-Line) | Interest on Lease Liability | Amortization of ROU Asset | Carrying Value of ROU Asset | ||||
1/1/20 | $ | $ | $ | $ | ||||
12/31/20 | ||||||||
12/31/21 | ||||||||
12/31/22 | ||||||||
12/31/23 |
Prepare the journal entries for Sage Hill for 2020 and 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Date | Account Titles and Explanation | Debit | Credit |
1/1/2012/31/201/1/2112/31/21 | |||
(To record the lease) | |||
1/1/2012/31/201/1/2112/31/21 | |||
(To record lease payment) | |||
1/1/2012/31/201/1/2112/31/21 | |||
1/1/2012/31/201/1/2112/31/21 | |||
1/1/2012/31/201/1/2112/31/21 | |||
Suppose Sage Hill incurs initial direct costs of $700 related to the lease. Prepare the journal entries for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Date | Account Titles and Explanation | Debit | Credit |
1/1/2012/31/20 | |||
(To record the lease) | |||
1/1/2012/31/20 | |||
(To record lease payment) | |||
1/1/2012/31/20 | |||
Step by Step Solution
3.30 Rating (165 Votes )
There are 3 Steps involved in it
Step: 1
ANSWER Particulars Year 0 Year 1 Year 2 Year 3 Annual Payment 4590 4590 4590 4590 PVF 5 10000 09524 ...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