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On January 1, 2020, Aylmer decided to lease a machine. The accountant at the time did not know how to record this asset (the accountant
On January 1, 2020, Aylmer decided to lease a machine. The accountant at the time did not know how to record this asset (the accountant did not take Intermediate Accounting 2 at Fanshawe!). NO TRANSACTIONS relating to leases were recorded. The following information pertains to the leased machine:
- The lease term is 6 years and the economic life of the asset is 7 years.
- The annual lease payment is $25,600. In addition to the lease payment, annual executory costs (insurance) of $890 must be made.
- Interest rate associated with this lease is 4%
Make the appropriate calculations and requirements for reconciling the lease information. Then prepare all the appropriate entries (including setup up the asset, the liability and any payments and interest).
PV | |
Rate | |
Nper | |
Pymt | |
FV | |
Type |
This is my starting point.
Interest Expense |
Interest Payable |
(To record interest on Note) |
Right of Use Asset |
Lease Liability |
(To record beginning of lease) |
Lease Liability |
Cash |
(Recording of lease Payment) |
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