Question
On Jan. 1, 2051, Salomon Sports signed a lease agreement to use an industrial equipment for the next three years. The equipment has a useful
On Jan. 1, 2051, Salomon Sports signed a lease agreement to use an industrial equipment for the next three years. The equipment has a useful life of three years, and the straight-line depreciation method will be used. The lease is qualified for a financial lease and requires an annual lease payment of $40,211.48 at the end of each year from 2051 to 2053. With an applicable discount rate of 10%, the lease amortization schedule is as follows:
Beg. balance (a) | Lease payment (b) | Interest expense (c) | Lease amortized (d = b c) | Ending balance (a - d) | |
1 | 100,000.00 | 40,211.48 | 10,000.00 | 30,211.48 | 69,788.52 |
2 | 69,788.52 | 40,211.48 | 6,978.85 | 33,232.63 | 36,555.89 |
3 | 36,555.89 | 40,211.48 | 3,655.59 | 36,555.89 | 0 |
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Using the template below, provide the relevant accounting entries on Jan. 1, 2051, and Dec. 31, 2051, respectively, showing the dollar amounts and whether they are an increase or decrease.
Answer:
Jan. 1, 2051, Lease agreed. |
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Assets | Liabilities & Equity |
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Dec. 31, 2051, Lease payment. |
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Assets | Liabilities & Equity |
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