Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
Lease Accounting (25 marks) On January 1, Year 1, B Company leases equipment from A Company for an annual lease rental of $50,000. The lease
Lease Accounting (25 marks) On January 1, Year 1, B Company leases equipment from A Company for an annual lease rental of $50,000. The lease term is five years. The present value of the equipment is $210,618. Both companies assume the residual value of the equipment after five years is zero. Instructions: (5 marks each) a. Prepare the journal entries both of Lessee and Lessor on Year one under operating lease. b. Prepare the journal entries both of Lessee and Lessor on Year one under finance lease. c. Compute and illustrate the effects on the income statement and balance sheet of B Company at 31 December Year 1 under both operating and finance leases. d. Construct a table showing payments of interest and principal made every year for the five year lease term. e. Construct a table showing expenses charged to the income statement for the five year lease term if the equipment is purchased. Show a column for (1) amortization, (2) interest, and (3) total expenses
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started