Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: The lease payments are $13,400 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessee for a further five years for $4,000 per year. Past practice shows that the Watson Co. usually extends its leases due to the high- quality vehicles from this lessor. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,100 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee is $11,400 at the end of the first lease term and $3,800 at the end of the second lease term. The leased asset has a useful life of ten years and a fair value of $64,000. The interest rate implicit in the lease is 8%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset. (Round the intermediate and final answer to the nearest whole dollar amount.) Right-of-use asset 1-b. Record the initial journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar amount.) View transaction list Journal entry worksheet Record the inception of lease. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final answers to the nearest whole dollar amount.) Payment Period Opening Balance Amortization Table Cash Interest Payment Decrease in Balance Ending Balance 20X2 20X3 20X4 20X5 3. List the items that would appear in the lessee's SCI for the year ended 31 December 20X3. (Round the intermediate and final answers to the nearest whole dollar amount.) Statement of comprehensive Income 4. What is the amount of the total lease liability on the balance sheet on 31 December 20X3? Split this amount into the current and long-term portions. (Round the intermediate and final answers to the nearest whole dollar amount.) Statement of Financial Position 31 December 20X3 Lease liability Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: The lease payments are $13,400 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessee for a further five years for $4,000 per year. Past practice shows that the Watson Co. usually extends its leases due to the high- quality vehicles from this lessor. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,100 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee is $11,400 at the end of the first lease term and $3,800 at the end of the second lease term. The leased asset has a useful life of ten years and a fair value of $64,000. The interest rate implicit in the lease is 8%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset. (Round the intermediate and final answer to the nearest whole dollar amount.) Right-of-use asset 1-b. Record the initial journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar amount.) View transaction list Journal entry worksheet Record the inception of lease. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final answers to the nearest whole dollar amount.) Payment Period Opening Balance Amortization Table Cash Interest Payment Decrease in Balance Ending Balance 20X2 20X3 20X4 20X5 3. List the items that would appear in the lessee's SCI for the year ended 31 December 20X3. (Round the intermediate and final answers to the nearest whole dollar amount.) Statement of comprehensive Income 4. What is the amount of the total lease liability on the balance sheet on 31 December 20X3? Split this amount into the current and long-term portions. (Round the intermediate and final answers to the nearest whole dollar amount.) Statement of Financial Position 31 December 20X3 Lease liability
