Question

Hello I have an accounting quesiton.

Carla Vista Corp. agreed to lease property from Sunland Corp. effective January 1, 2020, for an annual payment of $25,592, beginning January 1, 2020. The property is made up of land with a fair value of $104,000 and a two-storey office building with a fair value of $170,000 and a useful life of 25 years with no residual value. The implicit interest rate is 9%, the lease term is 25 years, and title to the property will not be transferred to Carla Vista by the end of the lease term. Assume that there is also no bargain purchase option, but that the lease does meet other criteria to qualify as a capital lease. Both Carla Vista and Sunland use ASPE.

Prepare the required entries made by Carla Vista Corp. on January 1, 2020, and at its year end of December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation Debit Credit

( to record inception of lease)

(to record first lease payment on January 1)

(to record interest Dec 31)

( to record depreciation expense Dec 31)

Thank you

Answer 1

Answer:

Date	Account Description	Debit ($)	Credit ($)
1-Jan-2020	Land	104000
	Buildings	170000
	Lease Payable		248408
	Cash		25592
	(Being Lease Recorded)
31-Dec-2020	Interest Expesnes	22357
	Lease Payable	3235
	Cash		25592
31-Dec-2020	Depreciation (170000/25)	6800
	Accumulated Depreciation		6800
	(Being Building Depreciated)

Please Note:

Depreciation on Building is provided on Streight line Basis

No Depreciation Provided for the Land

Amortization Table
Year	Lease Rental	Interest Expesnes 9%	Lease Payable
0	25592	-	248408
1	25592	22357	245173
2	25592	22066	241647
3	25592	21748	237803

Year	Lease Rental	Discounting Factor	Present Value
0	25592	1	25592
1	25592	0.91743	23478.87
2	25592	0.84168	21540.27
3	25592	0.77218	19761.63
4	25592	0.70843	18130.14
5	25592	0.64993	16633.01
6	25592	0.59627	15259.74
7	25592	0.54703	13999.59
8	25592	0.50187	12843.86
9	25592	0.46043	11783.32
10	25592	0.42241	10810.32
11	25592	0.38753	9917.67
12	25592	0.35553	9098.72
13	25592	0.32618	8347.60
14	25592	0.29925	7658.41
15	25592	0.27454	7026.03
16	25592	0.25187	6445.86
17	25592	0.23107	5913.54
18	25592	0.21199	5681.17
19	25592	0.19449	4977.39
20	25592	0.17843	4566.38
21	25592	0.16370	4189.41
22	25592	0.15018	3843.41
23	25592	0.13778	3526.07
24	25592	0.12640	3234.83
			274259