Problem 21-06 (Part Level Submission)

Wildhorse Leasing Company agrees to lease equipment to Sheffield Corporation on January 1, 2020. The following information relates to the lease agreement.

1.		The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.		The cost of the machinery is $500,000, and the fair value of the asset on January 1, 2020, is $659,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Sheffield estimates that the expected residual value at the end of the lease term will be 60,000. Sheffield amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Wildhorse desires a 9% rate of return on its investments. Sheffields incremental borrowing rate is 10%, and the lessors implicit rate is unknown.

(Assume the accounting period ends on December 31.) Click here to view factor tables.

*(d)

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Prepare the journal entries Sheffield would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	Right-of-Use Asset	611265
	Lease Liability		611265
	(To record the lease.)
	Lease Liability	114143
	Cash		114143
	(To record lease payment.)
12/31/20	Amortization Expense	87324
	Right-of-Use Asset		87324
	(To record amortization.)
	Interest Expense	49712
	Lease Liability		49712
	(To record interest.)
1/1/21	Lease Liability	114143
	Cash		114143
12/31/21	Amortization Expense	87324
	Right-of-Use Asset		87324
	(To record amortization.)
	Interest Expense	43269
	Lease Liability		43269
	(To record interest.)

Need help with the interest expense and lease liability. Thank you

I was able to find the answer on my own 43,269