please answer questions 7

On January 1, 2019 Day Co. leased a new machine from Parr with the following pertinent information: Lease term 6 years $50,000 Annual rental payable at the beginning of each year Useful life of machine Day's incremental borrowing rate 8 years 15% Implicit interest rate in lease (known by Day) 12% Present value of annuity of 1 in advance for 6 periods at 12% 4.61 15% 4.35 The lease passes ownership of the machine to Day at the termination of the lease. The cost of the machine on Parr's accounting record is $375,500. Hint: see bottom of pages 839 - 841 (chapter 15) of your text book for an illustrative example. Please write your answers in the space provided in each question. 3. Record/Journalize the entry Day should make at the inception/beginning of the lease Jan 1, 2019 4. Record/journalize Day's annual lease payment at end of 2019 5. Record/journalize Day's annual interest payment at end of 2019 (use the effective interest rate method) 6. How much is Day's lease liability at the end of 2019. 7. Record/journalize the depreciation @ the end of 2019. Solution The above sttaed lease is capital lease as the ownership is transferred to the lessee. following payment will be made Lease payment to be done $50,000 4.61 230500(5000024.61) Particulars Amountins) Amountin S) MACHINE a/C DR.....230500 To Lease liability A/c 230500 (to initially recognise the lease liability & correponding asset) Lease liability A/c dr... 50000 to Cash A/c (to record lease payment) 50000 Interest expense A/e..dr 27660 To lease liability Ale 27660 (to record interest expense and accrete the lease liability using effective interest rate) (230500*.12) lease liability at the end of 2019 S208,160 (230500+27660-50000) 7. Record/journalize the depreciation @ the end of 2019