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