Question

Intermediate Accounting II

On January 1, 2018, Duncan-Lang Services, Inc. a computer software training firm, leased several computers under a two-year operating lease agreement from Neble Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $40,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Neble at a cost of $360,000 and were expected to have a useful life of five years with no residual value. Appropriate adjusting entries are recorded at the end of each quarter.

Required: Prepare the appropriate journal entries for both (a) the lessee and (b) the lessor from the beginning of the lease through the end of 2018. Round your answers to the nearest whole dollar amounts.

Answer 1

AS It is a Operating Lease Agreement, there would be no need to establish
the Lease Liability and account for assets, the Lease Payments will be expensed
as and when incurred.
IN THE BOOKS OF LESSEE
DESCRIPTION				DEBIT	CREDIT
6/30/18	Rent of Computers			$40,000.00
	Cash				$40,000.00
	(Amount paid on due date to Neble
	Leasing for the Computers)
31/12/2018	Rent of Computers			$40,000.00
	Cash				$40,000.00
	(Amount paid on due date to Neble
	Leasing for the Computers)
6/30/19	Rent of Computers			$40,000.00
	Cash				$40,000.00
	(Amount paid on due date to Neble
	Leasing for the Computers)
31/12/2019	Rent of Computers			$40,000.00
	Cash				$40,000.00
	(Amount paid on due date to Neble
	Leasing for the Computers)
IN THE BOOKS OF LESSOR
DESCRIPTION				DEBIT	CREDIT
6/30/18	Cash			$40,000.00
	Rent Revenue				$40,000.00
	(Amount Received from Duncan Lang
	Services for the Computers taken on
	Rent)
31/12/2018	Cash			$40,000.00
	Rent Revenue				$40,000.00
	(Amount Received from Duncan Lang
	Services for the Computers taken on
	Rent)
31/12/2018	Depriciation Expense			$72,000.00
	Accumulated Depriciation				$72,000.00
	(Depriciation charged on computers
	Rented to Duncan Lang)
6/30/19	Cash			$40,000.00
	Rent Revenue				$40,000.00
	(Amount Received from Duncan Lang
	Services for the Computers taken on
	Rent)
31/12/2019	Cash			$40,000.00
	Rent Revenue				$40,000.00
	(Amount Received from Duncan Lang
	Services for the Computers taken on
	Rent)
31/12/2019	Depriciation Expense			$72,000.00
	Accumulated Depriciation				$72,000.00
	(Depriciation charged on computers
	Rented to Duncan Lang)

THANK YOU

HOPING FOR A POSITIVE RESPONSE