Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment
Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $361,005 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $2,860,000 and has an estimated useful life of 12 years. The lessor's implicit rate is 6% and is known to Lessee Inc. The residual value of the building of $78,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $52,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: 0 Paid legal fees of $2,600 related to the execution of the lease. D Paid a fixed lease payment of $361,005 plus a 59,100 recurring payment to the lessor for hazard insurance on the building. I Received a lease incentive of $3,900 to sign the lease. a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability 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, 2030. Lease Payment Interest Reduction of on Llability Lease Llability Lease Llability S $ S Date Jan. 1, 2020 Jan 1, 2020 S Jan. 1. 2021 Jan. 1.2022 Jan. 1.2023 Jan. 1.2024 Jan. 1.2025 Jan. 1. 2026 Jan. 1. 2027 Jan 1, 2028 Jan 1, 2029 Jan 1, 2030 Total $ $ $ S
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