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.

d. Prepare the entries for Wayne Inc. for years 2020 and 2021, assuming Wayne Inc.s accounting year ends December 31.

Date	Account Name	Debit	Credit
Jan. 2, 2020
	To record payment of initial direct costs

Date	Account Name	Debit	Credit
Jan. 2, 2020
	To record lease liability and right-of-use asset

Date	Account Name	Debit	Credit
Jan. 2, 2020
	To record lease payment

Date	Account Name	Debit	Credit
Dec. 31, 2020
	To record lease expense

Date	Account Name	Debit	Credit
Jan. 2, 2021
	To record lease payment

Date	Account Name	Debit	Credit
Dec. 31, 2021
	To record lease expense