E F Problem 8. Lessor leases asset to Lessee on 1/1/2020. Lease term is 6 years. Lease payment is $97,580.60/year with the first payment due at the inception of the lease. Lessor's implicit rate is 12%dyear and this rate is known by Lessee. Fair market value of leased asset is $600,000. Remaining economic life of asset is 10 years. At the end of the initial 6 year term. Lessee has the option to renew the lease for another 2 years with the same lease payment. Required 1. Record the lease in the Lessee's books on 1/1/2020. Assume that on 1/1/2020, it is reasonably certain that the Lessee will exercise the renewal option at the end of the 6 year initial lease term. Also, prepare Lessee's entry to record amortization expense for year 2020. 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. Entries by Lessee at inception of lease on 1/1/2020: Account Debit Credit 1 1 1 1 Entry by Lessee at 12/31/2020 to record amortization expense: Account Debit Credit 2 2 0 1 2. Redo #1 assuming that on 1/1/2020, it is NOT reasonably certain that the Lessee will exercise the 2 renewal option at the end of the 6 year initial lease tem. 3 4 5 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. 6 Entries by Lessee at inception of lease on 1/1/2020: 7 Account Debit Credit 8 9 3 3 3 0 3 1 2 3 4 Entry by Lessee at 12/31/2020 to record amortization expense: 5 Account Debit 6 7 Credit 4 4 8 E F Problem 8. Lessor leases asset to Lessee on 1/1/2020. Lease term is 6 years. Lease payment is $97,580.60/year with the first payment due at the inception of the lease. Lessor's implicit rate is 12%dyear and this rate is known by Lessee. Fair market value of leased asset is $600,000. Remaining economic life of asset is 10 years. At the end of the initial 6 year term. Lessee has the option to renew the lease for another 2 years with the same lease payment. Required 1. Record the lease in the Lessee's books on 1/1/2020. Assume that on 1/1/2020, it is reasonably certain that the Lessee will exercise the renewal option at the end of the 6 year initial lease term. Also, prepare Lessee's entry to record amortization expense for year 2020. 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. Entries by Lessee at inception of lease on 1/1/2020: Account Debit Credit 1 1 1 1 Entry by Lessee at 12/31/2020 to record amortization expense: Account Debit Credit 2 2 0 1 2. Redo #1 assuming that on 1/1/2020, it is NOT reasonably certain that the Lessee will exercise the 2 renewal option at the end of the 6 year initial lease tem. 3 4 5 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. 6 Entries by Lessee at inception of lease on 1/1/2020: 7 Account Debit Credit 8 9 3 3 3 0 3 1 2 3 4 Entry by Lessee at 12/31/2020 to record amortization expense: 5 Account Debit 6 7 Credit 4 4 8
