Question

On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $18,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $106,000 and were expected to have a useful life of Five years with no residual value. Both firms record amortization and depreciation semi-annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest whole dollar amount.)

Answer 1

a)

Nath-Langstrom Services:Is a lessee here:

Date	Particulars	Debit ($)	credit($)
30-Jun-18	Rent (lease) Expense a/c	18000
	Cash a/c		18000
31-Dec-18	Rent (lease) Expense a/c	18000
	Cash a/c		18000

b) Computer World Corporation is a Lessor here.

Date	Particulars	Debit ($)	credit($)
30-Jun-18	Cash a/c	18000
	Rent revenue a/c		18000
31-Dec-18	Cash a/c	18000
	Rent revenue a/c		18000

30-Jun-18	Depreciation expense a/c	10600
	Accumulated depreciation a/c		10600
31-Dec-18	Depreciation expense a/c	10600
	Accumulated depreciation a/c		10600

Depreciation amount (Straight line method)	=106000/5
	21200
	Depreciation value=cost-salvage value/useful life of asset
	=21200/2 (paid semi annually, so divide by 2)
	10600