Question
In: Accounting
Journal Entries for a Capital Lease-Lessee On January 1, the lessee company signed an operating lease...
Journal Entries for a Capital Lease-Lessee
On January 1, the lessee company signed an operating lease contract. The lease contract calls for $3,000 payments at the end of each year for 10 years. The rate implicit in the lease is 10%.
Assume that the lease is to be accounted for as a capital lease. Also assume that the leased asset is to be amortized over the 12-year asset life rather than the 10-year lease term.
1. Make the journal entries necessary on the books of the lessee company at the end of the first year, including the recording of the first lease payment. Round your answers to the nearest whole dollar. For compound transactions, if an amount box does not require an entry, leave it blank.
| lease liability | 1157 | |
| intrest exp | 1843 | |
| cash | 3000 |
| amortization exp | ? | |
| accumulated amortization on leased asset | ? |
* Note: I got 1286 and it was wrong.
Solutions
Expert Solution
The economic useful life of leased asset cannot exceed the lease term hence it should be amortized over 10 years and not 12 year.
Amortisation = 18,434 / 10 years = $1,543
amortization exp..Dr $1,543
accumulated amortization on leased asset Cr ..$1,543
ekkarill92 answered 16 hours agoRelated Solutions
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