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The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pearl Company, a lessee. January 1, Commencement date Annual lease payment
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pearl Company, a lessee. January 1, Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, $110,269 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 6 years Fair value of asset at January 1, $622,000 Lessor's implicit rate 5 % Lessee's incremental borrowing rate 5 % 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. PEARL COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Plus GRY Interest on Liability Reduction of Lease Liability Date 1/1/20 $ $ 0 $ 0 1/1/20 110,269 0 110,269 1/1/21 110,269 24,057 86,212 1/1/22 110,269 19,746 90,523 1/1/23 110,269 15,220 95,049 1/1/24 110,269 10,468 99,801 1/1/25 110,269 5,478 104,791 12/31/26 5,000 238 4,762 $ 666,614 $ 75,207 $ 591,407 PEARL COMPANY (Lessee) Lease Amortization Schedule Interest on Liability Reduction of Lease Liability Lease Liability $ 0 $ 0 $ 591,407 0 110,269 481,138 24,057 86,212 394,926 19,746 90,523 304,403 15,220 95,049 209,354 10,468 99,801 109,553 5,478 104,791 4,762 238 4,762 0 $ 75,207 $ 591,407 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 titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Cred (To record the lease.) (To record first lease payment.) | (To record interest.) (To record amortization.) (To record second lease payment.) (To record interest.) (To record amortization.)
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