HW5 wbook Show Me How Video Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2017 Annual lease payments of $1,649, based on an interest rate of 10%, are to be made every December 31, beginning with December 31, 2017 V of Annuty of $1 Required: Refer to the table above for present value factors 1. Assume that the lease lu treated as an operating lesse a. Wit the value of the ferkin appear on Kottman's balance sheet) What account will indicate that lease payments have been made? From the viewpone of the lessee, there are two types of lease agreements operating and capital. In an operating lease, the lesser acquires the right to une an asset for a limited period of time. The required to record the right to use the property as an asset or to record the obligation for payments at a liability 2. Assume that the lease is treated as a capital lease or finance lease a. Identify and analyze the effect when the lease is signed. Activity Investing and Financing ACCOUNS Leased Asset Increase, Lease Obligation Increase Statement Balance Sheet only + Che My Wo Capital leases give the lessee sufficient rights of ownership and control of the property, and are recorded as an asset and depreciated. The present value of the lease payments is recorded as an asset and lability and interest expense is recorded each period based on the remaining obligation times the effective interest rate Identify and analyze the transaction by using the following steps: 1. Determine activity-operating, investing or financing. 2. Determine accounts affected and the amount of increases/decreases. 3. Determine the financial statements affected balance sheet, income statement. The accounting equation must balance for each transaction. does this entry affect the accounting equation? inancial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, ie, a decrease, be sure to enter the answer with a minus sign d answers to the nearest whole dollar. Assets Balance Sheet Liabilities Stockholders Equity Revenues ain why the value of the leased asset is not recorded at $6,596 ($1,649 x 4). The leased asset should be reported at the present value F Partially conect dentify and analyze the effect of the first lease payment on December 31, 2017. Income Statement Expenses of the payments which is t Date In 1 Column 2 Column 3 Lease Column 4 Interest Reduction of Lease Payment Expense Obligation Obligation 8% Col. 1-Col. 2 1/1/2017 $15,972 12/31/2017 $4,000 11,278 $2,722 13,250 12/31/2018 4,000 1,000 2,540 10.310 12/31/2019 4,000 125 3,175 7,135 12/31/2020 4,000 571 3,429 3,706 12/31/2021 4,000 294 3,706 0 Column 1 is the total amount of the payment. To compute the interest expense, (catumn 2) multiply the lease cbligation (csfumn 4) by the interest rate. Colume 3, the reduction of obligation is computed by ubtracting Column 2 from sume 1. Column 4 starts out as the present value of the lease obligation. This column is then reduced by the amount in column 3. does this entry affect the accounting equation? nancial statement item is not affected, select "No Entry and leave the amount box blank. If the effect on a financial statement item is negative, ie, a decrease, be sure to enter the answer with a minus sign hd answers to the nearest whole dolar Assets CheckMyW Balance Sheet Stockholders' Liabilities Equity Revenues Income Statement Net Expenses Incom Dad My Wik Incomed c Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar. Current liability portion Long-term lability portion Check My Wik Determine depreciation using straight-line TOMA Partially correct