Question
The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and Buffalo Electronics, a lessee, for a computer system. Commencement date October
The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and Buffalo Electronics, a lessee, for a computer system.
Commencement date | October 1, 2020 | ||
Lease term | 6 | years | |
Economic life of leased equipment | 6 | years | |
Fair value of asset at October 1, 2020 | $321,200 | ||
Book value of asset at October 1, 2020 | $280,000 | ||
Residual value at end of lease term | 0 | ||
Lessors implicit rate | 11 | % | |
Lessees incremental borrowing rate | 11 | % | |
Annual lease payment due at the beginning of | |||
each year, beginning with October 1, 2020 | $68,400 |
The collectibility of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease by the lessee and as a sales-type lease by the lessor.
Date | Lease Payment/Receipt | Interest (11%) on Unpaid Liability/Receivable | Reduction of Lease Liability/Receivable | Balance of Lease Liability/Receivable | ||||
10/01/20 | $321,200 | |||||||
10/01/20 | $68,400 | $68,400 | 252,800 | |||||
10/01/21 | 68,400 | $27,808 | 40,592 | 212,208 | ||||
10/01/22 | 68,400 | 23,343 | 45,057 | 167,151 | ||||
10/01/23 | 68,400 | 18,387 | 50,013 | 117,138 | ||||
10/01/24 | 68,400 | 12,885 | 55,515 | 61,623 | ||||
10/01/25 | 68,400 | 6,777 | 61,623 | 0 | ||||
$410,400 | $89,200 | $321,200 |
Assuming the lessees accounting period ends on December 31, answer the following questions with respect to this lease agreement. (Round answers to 0 decimal places e.g. 58,971.) (1) What items and amounts will appear on the lessees income statement for the year ending December 31, 2020?
$ | Interest Expense |
$ | Amortization Expense |
(2) What items and amounts will appear on the lessees balance sheet at December 31, 2020?
Balance Sheet (Partial) | December 31, 2020 |
Current Liabilities: | |
Lease Liability | $ |
Long-term Liabilities: | |
Lease Liability | $212,208 |
Non-current Assets: | |
Right-of-Use Asset | $ |
(3) What items and amounts will appear on the lessees income statement for the year ending December 31, 2021?
$ | Interest Expense |
$53,533 | Amortization Expense |
(4) What items and amounts will appear on the lessees balance sheet at December 31, 2021?
Balance Sheet (Partial) | December 31, 2020 |
Current Liabilities: | |
Lease Liability | $ |
Long-term Liabilities: | |
Lease Liability | $167,151 |
Non-current Assets: | |
Right-of-Use Asset | $ |
I am needing help finding the rest of the values on all parts with $
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