Exercise 13-11 Accounting for lessee operating lease (LO 13-5, LO 13-6)

On October 1, 20X1, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 20X2. Vaughns incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.)

Required:

1. How much of the lease liability should be classified as current on December 31, 20X1, and December 31, 20X2? (Round your intermediate calculations and final answers to 2 decimal places.)
2. 

Exercise 13-11 Accounting for lessee operating lease (LO 13-5, LO 13-6) On October 1, 20X1, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 20X2. Vaughn's incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required: 1. At what amount should Vaughn record the leased equipment on October 1, 20X1? (Round your answer to the nearest whole dollar.) 2. What is the amount of lease expense that Vaughn should record for the year ended December 31, 20X1, and for the year ended December 31, 20X2? 3. How much of the lease liability should be classified as current on December 31, 20X1, and December 31, 20x2? (Round your intermediate calculations and final answers to 2 decimal places.) Answer is complete but not entirely correct. 20X1 20X2 1 Value of leased equipment $ 36,959 2 $ 10,000 Lease expense Total current liability 2,500 34,437.10 3. $ IS 27,125.20