Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $75,000 under a 5-year lease on December 20, 2018. The lease commences on January 1, 2019, and Leewin will return the automobile to Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,000 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,000, due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 7% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2,000.

15) Assuming that this is classified as an operating lease, what is the amount of the lease liability at January 1, 2019 before the payment?

16) Based on the above information, calculate the right-of-use asset on January 1, 2019.

Answer:

17) Based on the above information, what is the journal entry Leewin made to record the initial payment of $10,000?

18) Based on the above information, record the lessee's journal entry for the payment of initial direct costs.

19) Assuming this is an operating lease, what journal entries does Leewin make on January 1, 2019?