On January 1, 2016, Concord Corp. signs a contract to lease manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year. Additional information pertaining to the lease is as follows:

1.	The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due every January 1, beginning January 1, 2016.
2.	The fair value of the manufacturing equipment on January 1, 2016, is $150,000. The equipment has an economic life of 7 years.
3.	Concord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term.
4.	Concord Corp. depreciates similar assets using the straight line method.
5.	Concords incremental borrowing rate is 15% per year; Stones implicit interest rate is 10% and known by Concord.
6.	Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes.

Required:

1.	Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord.
2.	Calculate the amount of the asset and liability to be reported by Concord at the inception of the lease.
3.	Prepare a table summarizing the lease payments and interest expense.
4.	Prepare journal entries for Concord for the entire lease period. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term.

Chart of Accounts

CHART OF ACCOUNTS

Concord Corp.

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Leased Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
252	Capital Lease Obligation
255	Accrued Interest on Capital Lease Obligation
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
514	Maintenance Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
891	Loss on Guaranteed Residual Value
910	Property Tax Expense

Next Level

Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord.

Determine what type of lease this is for Concord.

Criteria	Met
Transfer of ownership at end of lease	No
Bargain purchase option	No
Lease term is 75% or more of economic life	No
Present value of lease payments is 90% or more of fair value	No

Determine what type of lease this is for Concord.

Operating lease

Analysis

Calculate the amount of the asset and liability to be reported by Concord at the inception of the lease. Additional Instruction

Prepare a table summarizing the lease payments and interest expense. Additional Instructions

Concord Corp.

Summary of Lease Payments and Interest Expense

2016 - 2018

1	Date	Annual Lease Payment	Interest at 10% on Unpaid Obligation	Balance of Capital Lease Obligation
2	January 1, 2016 : Before the Initial Payment
3	January 1, 2016
4	December 31, 2016
5	January 1, 2017
6	December 31, 2017
7	January 1, 2018
8	December 31, 2018

General Journal

Prepare journal entries for Concord for the entire lease period for the year 2016. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Prepare journal entries for Concord for the entire lease period for the year 2017. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

Prepare journal entries for Concord for the entire lease period for the year 2018. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

I only need help with Prepare journal entries for Concord for the entire lease period for the year 2017. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term, and Prepare journal entries for Concord for the entire lease period for the year 2018. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term. Thank You