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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc, who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease. Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building. Received a lease incentive of $600 to sign the lease. a. How would Lessee Inc. classify the lease? Support Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability b. Prepare an arnortization 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 nel rounding difference to Lease Liability in the Interest on Liability amount for Jan 1, 2030. Lease Interest Reduction of Date Payment on Liability Lease Liability Lease Liability 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 Check Question 2 Not complete Marked out of 97.00 P Flag question 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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease, Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building Received a lease incentive of $600 to sign the lease. Support a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability Compute the value of the right-of-use asset on January 1, 2020, rounding amount to the nearest dollar. S Check Previous ? Save Answers Next a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability d. Prepare the entries for Lessee Inc. for years 2020 and 2021. Assume legal fees were paid and the lease incentive was received in 2019. Note: Round your answers to the nearest whole dollar, Date Account Name Dr. Cr. Jan 1, 2020 Lease Incentive Payable Initial Direct Cost Support To record lease liability and right-of-use asset Jan. 1, 2020 To record lease payment Dec 31, 2020 To record interest Dec 31, 2020 To record amortization Jan. 1, 2021 To record lease payment Dec 31, 2021 To record interest Dec 31, 2021 To record amortization Check Question 2 Not complete Marked out of 97.00 P Flag question 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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease. Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building. Received a lease incentive of $600 to sign the lease. Support a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability e. What would be the value of the lease liability on January 1, 2020, if the lessor charged a market price for hazard insurance, which changed from year to year? Note: Round amount to the nearest whole dollar. Lease liability $ Check 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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc, who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease. Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building. Received a lease incentive of $600 to sign the lease. a. How would Lessee Inc. classify the lease? Support Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability b. Prepare an arnortization 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 nel rounding difference to Lease Liability in the Interest on Liability amount for Jan 1, 2030. Lease Interest Reduction of Date Payment on Liability Lease Liability Lease Liability 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 Check Question 2 Not complete Marked out of 97.00 P Flag question 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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease, Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building Received a lease incentive of $600 to sign the lease. Support a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability Compute the value of the right-of-use asset on January 1, 2020, rounding amount to the nearest dollar. S Check Previous ? Save Answers Next a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability d. Prepare the entries for Lessee Inc. for years 2020 and 2021. Assume legal fees were paid and the lease incentive was received in 2019. Note: Round your answers to the nearest whole dollar, Date Account Name Dr. Cr. Jan 1, 2020 Lease Incentive Payable Initial Direct Cost Support To record lease liability and right-of-use asset Jan. 1, 2020 To record lease payment Dec 31, 2020 To record interest Dec 31, 2020 To record amortization Jan. 1, 2021 To record lease payment Dec 31, 2021 To record interest Dec 31, 2021 To record amortization Check Question 2 Not complete Marked out of 97.00 P Flag question 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 $55,539 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $440,000 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 $12,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $8,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $400 related to the execution of the lease. Paid a fixed lease payment of $55,539 plus a $1,400 recurring payment to the lessor for hazard insurance on the building. Received a lease incentive of $600 to sign the lease. Support a. How would Lessee Inc. classify the lease? Amortization Schedule Value of Right-of-Use Asset Journal Entries Value of Lease Liability e. What would be the value of the lease liability on January 1, 2020, if the lessor charged a market price for hazard insurance, which changed from year to year? Note: Round amount to the nearest whole dollar. Lease liability $ Check