Exercise 12-2 Accounting for lessee with uneven, beginning of period lease payments under ASU 2016-02 (LO 12-1, LO 12-6)

On January 1, 2017, Bonduris Company leases warehouse space in Oakland, CA. The lease is for six years with payments to be made at the beginning of each year. The lease calls for Bonduris to pay $15,000 on January 1, 2017. The lease calls for subsequent rent payments to increase 10% per year. For example, the January 1, 2018 payment will be $16,500, and the January 1, 2019 payment will be $18,150. Bonduris has adopted early ASC 842 and has appropriately classified the lease as an operating lease. Bonduris has a calendar reporting year and an incremental borrowing rate of 7%. Bonduris uses straight-line amortization for its long-lived assets. Ignore current and non currrent classification for this exercise.

Required:

1. What journal entries should Bonduris make at January 1, 2017, to record the effects of the lease?
2. Prepare Bonduriss amortization table for the leased warehouse.
3. What is the balance of the lease liability on January 1, 2018, after Bonduris makes the rent payment?
4. What is the balance of the right-of-use asset on January 1, 2018, after Bonduris makes the rent payment?