D F G H 15 1 Problem 9. Lessor leases asset to Lessee on 1/1/2020. Lease term is 8 years. Lease payment is 2 $97,580.60/year with the first payment due at the inception of the lease. Lessor's implicitrate is 12%/year 3 and this rate is known by Lessee. Fair market value of leased asset is $600,000. Remaining economic life 4 of asset is 10 years. 5 Lessee has the option to terminate the lease at the end of the 3 year by paying an early termination fee 6 of $200,000. 7 Required 8 9 1. Record the lease in the Lessee's books on 1/1/2020. Assume that on 1/1/2020, it is reasonably certain 10 that the Lessee will exercise the early termination option at the end of the 3rd year. 11 12 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 13 Entries by Lessee at inception of lease on 1/1/2020: 14 Account Debit Credit 16 1 17 1 1 19 20 21 22 2. Redo #1 assuming that on 1/1/2020, it is NOT reasonably certain that the Lessee will exercise the early 23 termination option at the end of the 3rd year. 24 25 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 26 Entries by Lessee at inception of lease on 1/1/2020: 27 28 Account Debit Credit 29 2 30 2 31 2 32 18 1 2 1 Columni 2 Accumulated epreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B1. Sht) 6 Lease payable (Bal. Sht) 7 Lease receivaille (Bal. Sht) 8 Note payable Bal. Sht) 9 Prepaid service contract (Bal. Sht) 10 Right-of-Use asset (Bal. Sht) 11 Warehouse (Eul. Sht) 12 Amortization xpense (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 D F G H 15 1 Problem 9. Lessor leases asset to Lessee on 1/1/2020. Lease term is 8 years. Lease payment is 2 $97,580.60/year with the first payment due at the inception of the lease. Lessor's implicitrate is 12%/year 3 and this rate is known by Lessee. Fair market value of leased asset is $600,000. Remaining economic life 4 of asset is 10 years. 5 Lessee has the option to terminate the lease at the end of the 3 year by paying an early termination fee 6 of $200,000. 7 Required 8 9 1. Record the lease in the Lessee's books on 1/1/2020. Assume that on 1/1/2020, it is reasonably certain 10 that the Lessee will exercise the early termination option at the end of the 3rd year. 11 12 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 13 Entries by Lessee at inception of lease on 1/1/2020: 14 Account Debit Credit 16 1 17 1 1 19 20 21 22 2. Redo #1 assuming that on 1/1/2020, it is NOT reasonably certain that the Lessee will exercise the early 23 termination option at the end of the 3rd year. 24 25 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 26 Entries by Lessee at inception of lease on 1/1/2020: 27 28 Account Debit Credit 29 2 30 2 31 2 32 18 1 2 1 Columni 2 Accumulated epreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B1. Sht) 6 Lease payable (Bal. Sht) 7 Lease receivaille (Bal. Sht) 8 Note payable Bal. Sht) 9 Prepaid service contract (Bal. Sht) 10 Right-of-Use asset (Bal. Sht) 11 Warehouse (Eul. Sht) 12 Amortization xpense (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
