Leases T Six ovens were rented on December 31, with $20,000 charged to rent expense The lease runs for 6 years with an implicit interest rate of 5 At the end of the 6 years, Peyton will own them Make any necessary adjusting entries I 1 To record lease asset and liability This one is a tad more involved a First, we need to correct the entry that was made when the ovens were rented as this is a capital lease and not rent expense At the time the lease was acquired, the company debited Rent Expense To correct this entry, debit Depreciation Expense and credit Rent expense for the amount given in the instructions b Second, we need to correctly adjust the lease asset and liability for the ovens which were leased for $20,000 and we need to report the PRESENT VALUE of the Lease obligation which we calculate using the PV of an Annuity at 5 (given) for 6 periods The factor from the table is 5 0757 So take $20,000 x 5 0757 AMOUNT of the PV of the Lease Once calculated, we debit Baking equipment (Add a line below the current account in the Trial balance so that we can see this amount fully ) and Credit Lease Liability for the same amount 'Based on the information in the instructor's direction and instruction 1 (a ), the following is incorrect Adjusting Journal Entry Dated Account Title Explanationa Post Ref o Debito Credita Dec 31, 20170 Rent expense (E )0 $20,0000 Prepaid rent (A ) D $20,0000 0 Recorded rent expense for 20170 Corrected adjusting journal entries at the following Adjusting Journal Entrya Datea Account Title Explanation Post Ref p Debito Credito Dec 31, 20170 70 $20 000 Rent expense (E ) O $20,0000 Recorded rent expense for 2017 0 d Adjusting Journal Entrya Datea Account Title Explanation Post Ref p Debito Credita Dec 31, 20170 Depreciation expense (E )0 $20,0000 Accumulated depreciation (CA )0 0 $20 0000 Recorded depreciation expense for 2017 0 0PEYTON APPROVED TRIAL BALANCE W N As of December 31, 2017 Adjusting entries Dr Cr Dr Cr Dr Cr Cash 1,488,999 34 1,488,999 34 Marketable Securities 5,500,000 00 1 265,000 00 5,235,000 00 Accounts Receivable 7,092,495 88 7,092,495 88 Baking Supplies 1,605,098 52 1,605,098 52 g Merchandise Inventory 128, 152 63 128, 152 63 10 Prepaid Rent 71,877 07 71,877 07 11 Prepaid Insurance 207,834 14 207,834 14 12 Misc Supplies 17,647 42 17,647 42 13 Land 250,000 00 250,000 00 14 Building 1,250,000 00 1,250,000 00 15 Baking Equipment 2,254, 140 00 2,254, 140 00 16 17 Accumulated Depreciation 328,282 00 328,282 00 18 Patent19 Accounts Payable 1,555,212 85 1,555,212 85 20 Wages Payable 250,203 31 250,203 31 21 Interest Payable 21,888 22 21,888 22 22 Current Portion of Bonds Payable 1,000,000 00 1,000,000 00 23 Income Taxes Currently Payable 1,042, 118 16 3 52,325 25 2 375 00 990, 167 91 24 Accrued Pension Liability 25 Accrued Employees Health Insurance 26 Lease Liability 27 28 Deferred Tax Liability 3 52,325 25 52,325 25 29 Bonds Payable 4,000,000 00 4,000,000 00 30 Preferred Stock 500,000 00 500,000 00 31 Common Stock 1,750,000 00 1,750,000 00 32 Beginning Retained earnings 2,213, 122 59 2,213, 122 59 33 Dividends Preferred 50,000 00 50,000 00 34 Dividends Common 5,250,000 00 5,250,000 00 35 Bakery Sales 33,881,157 15 33,881,157 15 36 Merchandise Sales 124,795 80 124,795 8037 Cost of Goods Sold Baker 10,954,907 36 10,954,907 36 38 Cost of Goods Sold Merch 88,994 79 88,994 79 39 Rent Expense 1,576,731 95 1,576,731 95 40 Wages Expense 2,604,526 23 2,604,526 23 41 Misc Supplies Expense 263,224 56 263,224 56 42 Repairs and Maintenance 47,353 05 47,353 05 43 Business License Expense 211,757 65 211,757 65 44 Misc Expense 141, 171 08 141, 171 08 45 Depreciation Expense 634,520 00 634,520 00 46 Insurance Expense 112,937 69 112,937 69 47 Advertising Expense 160,413 49 160,413 49 48 Interest Expense 484,703 27 484,703 27 49 Telephone Expense 50,821 34 50,821 34 50 Pension Expense 51 Retired Employees Health Ins 52 Patent Amortization 53 54 Unrealized Gain (Loss) on Marketable Securities Held for Sale 265,000 00 265,000 00

Question

Leases T Six ovens were rented on December 31, with $20,000 charged to rent expense   The lease runs for  6 years with an implicit interest rate of 5   At the end of the 6 years, Peyton will own them  Make any necessary adjusting entries  I 1  To record lease asset and liability  This one is a tad more involved    a  First, we need to correct the entry that was made when the ovens were rented as this is a  capital lease and not rent expense  At the time the lease was acquired, the company debited Rent Expense  To correct this entry, debit Depreciation Expense and credit Rent expense for  the amount given in the instructions   b  Second, we need to correctly adjust the lease asset and liability for the ovens which were  leased for $20,000 and we need to report the PRESENT VALUE of the Lease obligation  which we calculate using the PV of an Annuity at 5  (given) for 6 periods  The factor from the table is 5 0757  So take $20,000 x 5 0757   AMOUNT of the PV of the Lease  Once calculated, we debit Baking equipment (Add a line below the current account in the Trial balance so that we can see this amount fully ) and Credit Lease Liability for the same amount 'Based on the information in the instructor's direction and instruction 1  (a ), the following is  incorrect  Adjusting Journal Entry Dated Account Title   Explanationa Post Ref o Debito Credita Dec  31, 20170 Rent expense (E )0 $20,0000 Prepaid rent (A )  D $20,0000 0 Recorded rent expense for 20170 Corrected adjusting journal entries at the following  Adjusting Journal Entrya Datea Account Title   Explanation Post Ref p Debito Credito Dec   31, 20170 70 $20 000  Rent expense (E )  O $20,0000 Recorded rent expense for 2017 0 d Adjusting Journal Entrya Datea Account Title   Explanation Post Ref p Debito Credita Dec   31, 20170 Depreciation expense (E )0 $20,0000 Accumulated depreciation (CA )0 0 $20 0000 Recorded depreciation expense for 2017 0 0PEYTON APPROVED TRIAL BALANCE W N As of December 31, 2017 Adjusting entries Dr Cr Dr Cr Dr Cr Cash 1,488,999 34 1,488,999 34 Marketable Securities 5,500,000 00 1 265,000 00 5,235,000 00 Accounts Receivable 7,092,495 88 7,092,495 88 Baking Supplies 1,605,098 52 1,605,098 52 g Merchandise Inventory 128, 152 63 128, 152 63 10 Prepaid Rent 71,877 07 71,877 07 11 Prepaid Insurance 207,834 14 207,834 14 12 Misc  Supplies 17,647 42 17,647 42 13 Land 250,000 00 250,000 00 14 Building 1,250,000 00 1,250,000 00 15 Baking Equipment 2,254, 140 00 2,254, 140 00 16 17 Accumulated Depreciation 328,282 00 328,282 00 18 Patent19 Accounts Payable 1,555,212 85 1,555,212 85 20 Wages Payable 250,203 31 250,203 31 21 Interest Payable 21,888 22 21,888 22 22 Current Portion of Bonds Payable 1,000,000 00 1,000,000 00 23 Income Taxes Currently Payable 1,042, 118 16 3 52,325 25 2 375 00 990, 167 91 24 Accrued Pension Liability 25 Accrued Employees Health Insurance 26 Lease Liability 27 28 Deferred Tax Liability 3 52,325 25 52,325 25 29 Bonds Payable 4,000,000 00 4,000,000 00 30 Preferred Stock 500,000 00 500,000 00 31 Common Stock 1,750,000 00 1,750,000 00 32 Beginning Retained earnings 2,213, 122 59 2,213, 122 59 33 Dividends   Preferred 50,000 00 50,000 00 34 Dividends   Common 5,250,000 00 5,250,000 00 35 Bakery Sales 33,881,157 15 33,881,157 15 36 Merchandise Sales 124,795 80 124,795 8037 Cost of Goods Sold   Baker 10,954,907 36 10,954,907 36 38 Cost of Goods Sold   Merch 88,994 79 88,994 79 39 Rent Expense 1,576,731 95 1,576,731 95 40 Wages Expense 2,604,526 23 2,604,526 23 41 Misc  Supplies Expense 263,224 56 263,224 56 42 Repairs and Maintenance 47,353 05 47,353 05 43 Business License Expense 211,757 65 211,757 65 44 Misc  Expense 141, 171 08 141, 171 08 45 Depreciation Expense 634,520 00 634,520 00 46 Insurance Expense 112,937 69 112,937 69 47 Advertising Expense 160,413 49 160,413 49 48 Interest Expense 484,703 27 484,703 27 49 Telephone Expense 50,821 34 50,821 34 50 Pension Expense 51 Retired Employees Health Ins  52 Patent Amortization 53 54 Unrealized Gain (Loss) on Marketable Securities Held for Sale 265,000 00 265,000 00

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Leases T Six-ovens were rented on December-31, with $20,000 charged-to rent expense. -The-lease runs for- 6 years

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Leases T Six-ovens were rented on December-31, with $20,000 charged-to rent expense. -The-lease runs for- 6 years

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