Leased Assets

Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,461, based on an interest rate of 12%, are to be made every December 31, beginning with December 31, 2017.

PV of Annuity of $1. REFER TO THE TABLE BELOW.

Refer to the table above for present value factors.

1. Assume that the lease is treated as an operating lease.

a. Will the value of the forklift appear on Koffman's balance sheet? (YES/ NO)

What account will indicate that lease payments have been made? (CHOOSE ONE; BOTH THE INTEREST EXPENSE AND LEASE OBLIGATION ACCOUNTS/ INTEREST EXPENSE/ LEASE EXPENSE/ LEASE OBLIGATION)

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

- Accounts: Leased Asset Increase, Lease Obligation Increase,

- Statement(s): Balance Sheet Only

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar.

Explain why the value of the leased asset is not recorded at $5,844 ($1,461 x 4). The leased asset should be reported at the present value of the payments which is $BLANK not at $BLANK

b. Identify and analyze the effect of the first lease payment on December 31, 2017.

- Activity: Operating and Financing

- Accounts: Cash Decrease, Lease Obligation Decrease, Interest Expense Increase

- Statement(s): Balance Sheet and Income Statement

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar.

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 liability portion:

TABLE 9-4 Present Value of Annuity of $1 (N) Periods 2% 3% 4% 5% 6% 7% 8% 10% 12% 15% .98039 1.94156 2.88388 3.80773 4.71346 5.60143 6.47199 7.32548 8.16224 8.98259 9.78685 10.57534 11.34837 12.10625 12.84926 13.57771 14.29187 14.99203 15.67846 16.35143 17.65805 18.91393 20.12104 21.28127 22.39646 97087 96154 95238 94340 93458 .92593 90909 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.73554 2.82861 2 .77509 2.72325 2.67301 2.62432 2.57710 2.48685 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.16987 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 3.79076 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.35526 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 4.86842 7.01969 6.73274 6.46321 6 .20979 5.97130 5.74664 5.33493 7.78611 7.435337.10782 6.801696.515236.24689 5.75902 8.53020 8.11090 7.72173 7.36009 7.02358 6.71008 6.14457 9.25262 8.76048 8.30641 7.88687 7.49867 7.13896 6.49506 9.95400 9.38507 8.86325 8.38384 7.94269 7.53608 6.81369 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.10336 11.29607 10.56312 9.89864 9.29498 8.74547 8.24424 7.36669 11.93794 11.11839 10.37966 9.71225 9.10791 8.55948 7.60608 12.56110 11.65230 10.83777 10.10590 9.44665 8.85137 7.82371 13.1661212.16567 11.27407 10.47726 9.76322 9.12164 8.02155 13.75351 12.65930 11.68959 10.82760 10.05909 9.371898.20141 14.32380 13.13394 12.08532 11.15812 10.33560 9.60360 8.36492 14.87747 13.59033 12.46221 11.46992 10.59401 9.81815 8.51356 15.93692 14.45112 13.16300 12.04158 11.06124 10.20074 8.77154 16.93554 15.24696 13.79864 12.55036 11.46933 10.52876 8.98474 17.87684 15.98277 14.3751913.00317 11.82578 10.80998 9.16095 18.76411 16.66306 14.89813 13.40616 12.13711 11.05108 9.30657 19.60044 17.29203 15.37245 13.76483 12.40904 11.25778 9.42691 .89286 1.69005 2.40183 3.03735 3.60478 4.11141 4.56376 4.96764 5.32825 5.65022 5.93770 6.19437 6.42355 6.62817 6.81086 6.97399 7.11963 7.24967 7.36578 7.46944 7.64465 7.78432 7.89566 7.98442 .05518 86957 1.62571 2.28323 2.85498 3.35216 3.78448 4.16042 4.48732 4.77158 5.01877 5.23371 5.42062 5.58315 5.72448 5.84737 5.95423 6.04716 6.12797 6.19823 6.25933 6.35866 6.43377 6.49056 6.53351 6.56598 8