On January 1, 20X1, Seven Wonders Inc. signed a five-year noncancelable lease with Moss Company. The lease calls for five payments of $277,409.44 to be made at the end of each year. The leased asset has a fair value of $1,200,000 on January 1, 20X1. Seven Wonders cannot renew the lease, there is no bargain purchase option, and ownership of the leased asset reverts to Moss at the lease end. The leased asset has an expected useful life of six years, and Seven Wonders uses straight-line depreciation for financial reporting purposes. Its incremental borrowing rate is 12%. Moss's implicit rate of return on the lease is unknown. Seven Wonders uses a calendar year for financial reporting purposes. Use tables (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required: 2. Prepare an amortization schedule for the lease liability. 3. Prepare the journal entries to record (a) the lease as a finance lease on January 1, 20X1; (b) the lease payments on December 31, 20X1 and 20X2; and (c) the right-of-use asset amortization in 20X1 and 20x2. 4. What is the total amount of expense reported on Seven Wonders's 20X1 income statement from the lease? Required 2 Required 3 Required 4 Prepare an amortization schedule for the lease liability. (Round your intermediate calculations and final places. Input all values as positive amounts.) Amortization of Finance Lease Liability Seven Wonders Incorporated Date Interest Portion Cash Payment Reduction of Lease Liability Lease Liability 01/01/X1 0 $ 0.00 $ 0.00 12/31/X1 12/31/X2 $ 120,000.00 101,110.87 79,955.04 56,260.51 $ 277,409.44 277,409.44 277,409.44 277,409.44 277,409.44 12/31/X3 $ 1,000,000.00 842,590.56 666,291.99 468,837.59 247,688.66 157,409.44 176,298.57 197,454.40 221,148.93 247,688.65 12/31/X4 12/31/X5 29,720.79 0.00 > Answer is not complete. Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 4 Prepare the journal entries to record (a) the lease as a finance lease on January 1, 20X1; (b) the lease payments on December 31, 20X1 and 20X2; and (c) the right-of-use asset amortization in 20X1 and 20x2. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Round your answers to 2 decimal places.) No Date Debit Credit General Journal Right-of-use asset - Finance lease 1 01/01/20X1 1,000,000.00 Accumulated depreciation - Leased assets 1,000,000.00 2 12/31/20X1 Interest expense 120,000.00 157,409.40 Obligations under capital leases Cash 277,409.44 3 12/31/20X2 Depreciation expense Accumulated depreciation - Leased assets 101,110.90 176,298.60 x 277,409.44 4 12/31/20X1 Depreciation expense X 200,000.00 Accumulated depreciation - Leased assets X 200,000.00 Answer is not complete. Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 4 What is the total amount of expense reported on Seven Wonders's 20X1 income statement from the lease? (Round your final answer to the nearest whole dollar.) Total amount of expense $ 320,000
