Question
On December 31, 2020, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are
On December 31, 2020, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2026. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below:
| Dec. 31 | Payments | Interest | Decrease in Balance | Outstanding Balance | ||||||||||
| 2020 | $ | 519,115 | ||||||||||||
| 2020 | $ | 90,000 | $ | 90,000 | 429,115 | |||||||||
| 2021 | $ | 90,000 | $ | 17,165 | 72,835 | 356,280 | ||||||||
| 2022 | $ | 90,000 | 14,251 | 75,749 | 280,531 | |||||||||
| 2023 | $ | 90,000 | 11,221 | 78,779 | 201,752 | |||||||||
| 2024 | $ | 90,000 | 8,070 | 81,930 | 119,822 | |||||||||
| 2025 | $ | 90,000 | 4,793 | 85,207 | 34,615 | |||||||||
| 2026 | $ | 36,000 | 1,385 | 34,615 | 0 | |||||||||
What is the balance of the lease liability on Reagan's December 31, 2022, balance sheet (after the third lease payment is made)?
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Essential Knowledge For A First Year Audit Staff Intern In Big 4 Accounting
Authors: Kevin Hsu
1st Edition
1481097040, 978-1481097048
