The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Stellar Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1. $103.353 Residual value of equipment at end of lease term, guaranteed by the lessee $46,000 Expected residual value of equipment at end of lease term $41,000 Lease term 6 years Economic life of leased equipment Fair value of asset at January 1. $545,000 Lessor's implicit rate 8 %6 Lessee's incremental borrowing rate 8 % 6 years The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment Click here to view factor tables Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to decimal places eg. 5,275.) STELLAR COMPANY (Lessee) Lease Amortization Schedule Annual Lease Interest on Reduction of Lease Payment Plus GRV Liability Liability Lease Liab S $ S $ 103,353 103 353 103,353 35.332 35 332 68,021 103,353 29.890 73,463 103,353 24,013 79.340 103.353 17.666 85,687 103,353 10.811 92,542 46.000 3.407 42.593 666,118 121.119 544,999 Tetherland Prepare all of the journal entries for the lessee for and to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account tities and enter for the amounts. Round answers to O decimal places eg. 5,275. Record journal entries in the order presented in the problem.) Date Debit Account Titles and Explanation Leased Equipment Jan 1, 2020 545,000 Lease Liability (To record the lease.) Lease Liability Jan. 1.2020 103,353 Cash (To record first lease payment.) Interest Expense Dec 31, 2020 35.332 Interest Payable (To record interest.) Amortization Expense Dec 31, 2020 90.833 Jan. 1.2021 103,353 Lease Liability (To record amortization.) Leased Equipment Lease Liability (To record second lease payment.) Interest Expante Dec 31, 2021 29,890 Interest Payable (To record interest.) Amortization Expense Dec 31, 2021 90.833 Lease Liability * Your answer is incorrect. Suppose Stellar received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $ 540,000 Lease Liability $ 545,000 What if Stellar prepaid rent of $5,000 to Faldo? Right-of-use asset $ 550,000 Lease Liability $ 545,000
