Terms of warehouse contract with Premier Storage:

-The warehouse lease began on January 1, 2018, with a three-year term. The warehouse has an expected remaining useful life of 20 years. There is no provision in the contract for Chariot to obtain ownership of the warehouse.

-During the lease, Chariot has exclusive control over the entire warehouse building and surrounding property.

-Chariot agreed to lease payments of: $500,000 in 2018, $600,000 in 2019 and $700,000 in 2020. Payments are due on December 31 of each year with the first payment being made on December 31, 2018. Chariot is aware that Premier used a 5% interest rate when calculating the lease payments. Note: while the terms of the lease require uneven payment amounts, Chariot should amortize the right-of-use asset on a straight-line basis (as if all three payments were $600,000); this does not affect the amortization of the lease liability.

-The fair value of the warehouse is approximately $20 million.

For the warehouse lease, provide answers to the following questions:

1. Prepare an amortization schedule for the right-of-use asset and the lease liability.

2. Identify the journal entries Chariot would prepare to record the lease under the new lease accounting standard on:

January 1, 2018

December 31, 2018

December 31, 2019

December 31, 2020

3. Show how the warehouse lease contract would appear on the December 31, 2018 year-end Income Statement, Balance Sheet, and Statement of Cash Flows under the new lease accounting standard.