Question
Recording Entries for Operating Lease Lessee On January 2, 2020, Wayne Inc. signed an eight-year lease for office space for $24,000 annually, with the first
Recording Entries for Operating Lease Lessee
On January 2, 2020, Wayne Inc. signed an eight-year lease for office space for $24,000 annually, with the first payment due immediately. Wayne has the option to renew the lease for an additional four-year period on or before January 2, 2028, at market lease rates at the time of renewal. Wayne intends to evaluate rental options at the time of the option to renew. The remaining economic life of the office is 30 years. Wayne Inc. is not aware of the implicit rate of the lease but has an incremental borrowing rate of 7%. Wayne Inc. paid $1,000 on January 2, 2020, for initial direct lease costs.
a. How would Wayne Inc. classify the lease? | Finance, Operating, or Sales-Type |
b. Prepare an amortization schedule of the lease liability.
- Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
- Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1, 2027.
Date | Lease Payment | Interest on Liability | Reduction of Lease Liability | Lease Liability |
---|---|---|---|---|
Jan. 2, 2020 | ||||
Jan. 2, 2020 | ||||
Jan. 2, 2021 | ||||
Jan. 2, 2022 | ||||
Jan. 2, 2023 | ||||
Jan. 2, 2024 | ||||
Jan. 2, 2025 | ||||
Jan. 2, 2026 | ||||
Jan. 2, 2027 | ||||
Total |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started