Question

Huffy Co., a lessee, records a finance lease of machinery on January 1, 2020. The five annual lease payments of $525,000 are made at the beginning of each year. The present value of the lease payments at 10% is $2,189,180. Huffy uses straight-line depreciation with no salvage value.    

1. Prepare an amortization table for the life of the lease. Round all amounts to the nearest dollar.

Amortization Table
				Lease Liability
	Lease payment	Interest	Principal
2020
2021
2022
2023
2024

b. Prepare all of Huffy’s journal entries for 2020 and 2021 (10 points)

Date	Account Titles	Debit	Credit

Answer 1

Amortization Table-Huffy Corp.
	Lease payment	Interest	Principal	Lease Liability
2020				$2,189,180
2020	$525,000		$525,000	$1,664,180
2021	$525,000	$166,418	$358,582	$1,305,598
2022	$525,000	$130,560	$394,440	$911,158
2023	$525,000	$91,116	$433,884	$477,274
2024	$525,000	$47,727	$477,273	$1

In the Books of Huffy Corp.
Date	Account Tittle	Debit	Credit
01-Jan-2020	Right of use asset	$2,189,180.00
	Lease payabe		$2,189,180.00
01-Jan-2020	Lease payabe	$525,000.00
	Cash		$525,000.00
31-Dec-2020	Amortization expense (2189180/5)	$437,836.00
	Right of use asset		$437,836.00
01-Jan-2021	Interest expense	$166,418.00
	Lease Payable	$358,582.00
	Cash		$525,000.00
31-Dec-2021	Amortization expense (2189180/5)	$437,836.00
	Right of use asset		$437,836.00