Recording Entries for Operating LeaseLessee

On January 1 of Year 1, Yogart Inc. signed a 10-year lease for its retail outlet. The lease payments, paid semiannually each January 1 and July 1, are based upon semiannual sales and equal 5% of sales with a semiannual sales minimum of $1,000,000. Based on the previous three years, average sales per semiannual period are $1,200,000. Yogarts incremental borrowing rate is 6% and it is unaware of the rate implicit in the lease. The lease is classified as an operating lease by Yogart. The first semiannual payment of $50,000, calculated as 5% of $1,000,000, is due immediately on January 1 of Year 1. Yogarts accounting year ends June 30.

Required

a. Calculate the lease liability recorded by Yogart Inc. on January 1 of Year 1. Note: Round your answers to the nearest whole dollar. Lease liability: $XXX

b. Calculate the right-of-use asset recorded by Yogart Inc. on January 1 of Year 1. Right-of-Use Asset: $XXX

c. Prepare a schedule of the lease liability for the first year of the lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

d. Prepare a schedule of the right-of-use asset for the first year of the lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

e. Prepare the entries for Yogart Inc. on January 1, June 30, and July 1 of Year 1. Note: Round your answers to the nearest whole dollar.

f. On July 21 of Year 1, Yogart reported to the lessor its sales of $1,150,000 for the semiannual period ended June 30 of Year 1. Any rent adjustments are due to the lessor at the end of the following month after the sales. Record the adjusting entry required on July 31 of Year 1.

Note: Round your answers to the nearest whole dollar.

\begin{tabular}{|c|c|c|c|c|} \hline Date & LeasePayment & InterestonLiability & LeaseLiabilityChange & LeaseLiability \\ \hline Jan. 1, Year 1 & & & & $ \\ \hline Jan. 1, Year 1 & $ & $ & $ & $ \\ \hline July 1, Year 1 & $ & $ & $ & $ \\ \hline Jan. 1, Year 2 & $ & $ & $ & $ \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline \multicolumn{1}{|c|}{ Date } & & Account Name & Cr. \\ \hline Jul. 31, Year 1 & & & \\ \hline & & & \\ \hline & To record rent adjustment & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline Date & LeaseExpense & InterestonLiability & Right-of-UseAssetChange & Right-of-UseAsset \\ \hline Jan. 1, Year 1 & & & & $ \\ \hline Year 1 & $ & $ & $ & $ \\ \hline Year 2 & $ & $ & $ & $ \\ \hline \end{tabular}