Question

1. On 1/1/19, Greene company leased machinery with a fair value of $1,600,000 from gray corporation. the agreement is a 6-year noncancelable lease requiring annual payments. of $300,000 beginning 1/1/19. The machinery has a $51,500 residual value at the end of the lease, which is not guaranteed by Greene. Greene appropriately accounts for the lease. as a financing lease and is aware that the implicit rate in the lease is 6%. Prepare Greene's lease amortization table. What journal entry(ies) will Greene make on 12/31/21?

Answer 1

Lease Amortization Table

Year	Opening Balance	Interest Expense 6%	Payment $	Prinicipal Payment $	Residual Value	Closing Balance $
	A	B= A *6%	C	D= C-B	E	F=A-E-D
1/1/19	1600000	0	300000	300000	51500	1248500
1/1/20	1248500	74910	300000	225090	0	1023410
1/1/21	1023410	61405	300000	238595	0	784815
1/1/22	784815	47089	300000	252911	0	531904
1/1/23	531904	31914	300000	268086	0	263818
1/1/24	263818	15829	279647	263818	0	0
	Total	231147		1548500

Note: Considered Residual value of $51500 for calculation and deducted from Fair Value of $1600000 and taken 1548500 as Total Lease amount

Journal Entries - 12/31/21 - In the books of Greene Company

	Particulars	Debit	Credit
A	Interest Expense	47089
	Interest Payable		47089
	(Being Interest to be paid @ 6%)
B	Leased Machinery	252911
	Gray Corporation		252911
	(Being Lease outstanding balance accrued)
C	Gray Corporation	252911
	Interest Payable	47089
	Bank		300000
	(Being annual payment made)