The following facts pertain to a non-cancelable lease agreement between Mooney Leasing and Choi Group, a lessee (amounts in thousands).
Commencement date.......................................................................May 1, 2019
Annual lease payment due at the beginning of each year, beginning with May 1, 2019............................................................................................¥20,471.94
Bargain purchase option price at end of lease term.......................................¥ 4,000.00
Lease term..........................................................................................5 years
Economic life of leased equipment............................................................10 years
Lessor's cost..................................................................................¥65,000.00
Fair value of asset at May 1, 2019.........................................................¥91,000.00
Lessor's implicit rate.................................................................................8%
Lessee's incremental borrowing rate...............................................................8%
The collectibility of the lease payments by Mooney is probable.
Instructions
(Round all numbers to the nearest yen)
a. Prepare a lease amortization schedule for Choi for the 5-year lease term.
b. Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020. Choi's annual accounting period ends on December 31. Reversing entries are used by Choi.