H 8 1 Problem 8. Lessor leases asset to Lessee on 1/1/2020. Lease term is 6 years. Lease payment is 2 597,580.60/year with the first payment due at the inception of the lease. Lessor's implicit rate is 12%/year and this rate is known by Lessee. Fair market value of leased asset is $600,000. Remaining economic life of asset is 10 years. 4 5 At the end of the initial 6 year term, Lessee has the option to renew the lease for another 2 years with the 6 same lease payment. 7 Required 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 renewal option at the end of the 6 year initial lease term. Also, prepare 11 Lessee's entry to record amortization expense for year 2020. 12 13 14 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 15 Entries by Lessee at inception of lease on 1/1/2020: Account Debit Credit 17 1 18 19 20 21 22 23 Entry by Lessee at 12/31/2020 to record amortization expense: 24 Account Debit Credit 25 2 26 2 27 28 16 1 1 1 10 30 31 2. Redo #1 assuming that on 1/1/2020, it is NOT reasonably certain that the Lessee will exercise the 32 renewal option at the end of the 6 year initial lease term. 33 34 35 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 36 Entries by Lessee at inception of lease on 1/1/2020: 37 Account Debit Credit 38 3 39 3 40 3 41 3 42 43 44 Entry by Lessee at 12/31/2020 to record amortization expense: 45 Account Debit Credit 46 47 48 49 50 51 B D E F 1 Columni 2 Accumulated lepreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B. I. 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 (ebl. Sht) 12 Amortization xpense (Inc. Stmt) 13 Cost of goods sold (Inc. Stmt) 14 Gain on sale of warehouse (Inc. Stmt) 15 Interest experke (Inc. Stmt) 16 Interest revenue (Inc. Stmt) 17 Lease expensi (inc. Stmt) 18 Lease revenus (inc. Stmt) 19 Misc. expenses (Inc. Stmt) 20 Rent revenue Inc. Stmt) 21 Sales revenue inc. Stmt) 22 23 24 25 26 27