Journal Entry: Lease

Complete the following questions. Submit journal entries in an Excel Template, linked at the bottom of this page, and any written segments in Excels comments function. Do not submit two separate documents, as only one document can be accepted. For written answers, please make sure your responses are well written, formatted per APA Requirements and have proper citations, if applicable.

Assume that the following facts pertain to a non-cancelable lease agreement between Fifth-Third Leasing Company and Bob Evans Farms, a lessee.

Inception date	January 1 2014
Annual lease payment due at the beginning of each year, beginning with January 1, 2014	$81,365
Residual value of equipment at end of lease term, guaranteed by the lessee	$50,000
Lease term	6 years
Economic life of leased equipment	6 years
Fair value of asset at January 1, 2014	$400,000
Lessors implicit rate	12%
Lessees incremental borrowing rate	12%

The lessee assumes responsibility for all executory costs, which are expected to amount to $4,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight-line depreciation method for all equipment.

1. Using the Excel Template spreadsheet linked at the bottom of this page, prepare an amortization schedule that would be suitable for the lessee for the lease term.

2. Using the same spreadsheet set up an area for journal entries, prepare the journal entries for the lessee for 2014 and 2015 to record the lease agreement and all expenses related to the lease. Record them clearly in that spreadsheet. Assume the lessees annual accounting period ends on December 31 and that reversing entries are used when appropriate.

Prepare the journal entries to record the following.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

Date

Account Title

Amount

Amount

Account Title

Provide a one line explanation for the reason why the journal entry has been made.

				Bob Evans Farms - Lease Amortization Schedule
Date		Lease Payment		Interest Expense		Reduction of Lease Liability		Balance of Lease Liability
January 1 2014								$400,000
January 1 2014
January 1 2015
January 1 2015
January 1 2017
January 1 2018
January 1 2019
December 31 2019