Question

Please provide the Lease Obligation Table for the operating Lease from the Lessee's point of view which has the following contract terms:

Refer to the various tables at the end of Chapter 6 of your textbook for all the necessary factors needed to estimate the lease Present Value

				Is the Lease Term
Revised Contract Terms				Change from
				Finance Lease
1	Lease Term		2 years	Yes
2	Implied Lease Rate		6%	Yes
3	Annual Lease Payment		40,000	Yes	Note: the sum over the available contract term remains 40,000
4	Residual Value		0	NO
5	Timing of lease payments		At start of year	Yes

Answer 1

Ans :

Year	Lease payment	Discount Factor @ 6%	Present value of Lease payments
1	40000	0.943	37720
2	40000	0.89	35600
Total	80000		73320

Journal in books of lessee : Right of Use ( Asset) Dr. 73320

                                                Lease liability            Cr. 73320

Year	Lease Liability b/f (A)	Lease payment	Interest ( B= A * 6% )	Decrease in lease liability ( C = 40000 – B)	Lease Liability b/f ( D = A – C)
1	73320	40000	4399	35601	37719
2	37719	40000	2281 ( Bal fig )	37719	0