On 12/31/20 Josh leased computer equipment from Ryan with a 4 year lease. Lease Payments of...

On 12/31/20 Josh leased computer equipment from Ryan with a 4 year lease. Lease Payments of $10,000 are due on 12/31 and start on 12/31/2020. Josh used 3% interest rate to account for the lease. The useful life of the equipment is 8 years. Assume the fair value is $45,000. Both companies have a 12/31 year end. THIS IN AN OPERATING LEASE.

1. Record the journal entries for Ryan for 2020 and 2021.

2. Show the lease on Ryan B/S AND I/S for 2021.

Solutions

Expert Solution

An operating lease is a contract that permits the use of an asset but does not convey ownership rights of the asset. There is no ownership transfer to the lessee at the end of the lease, lease payments are charged to profit and loss a/c and outstanding lease payments are recorded as current liability in the balance sheet.

Journal entries in the books of Ryan compnay for the year 2020:

1. Bank a/c DR 10000

To Lease Rental Income A/c 10000

(Being lease rent received)

2. Lease Receivable a/c Dr- 10000

To Lease Rental Income A/c-10000

(Being provision provided for the year ended)

Journal entries in the books of Ryan compnay for the year 2021:

1. Bank a/c DR 10000

To Lease Rental Income A/c 10000

(Being lease rent received)

2. Lease Receivable a/c Dr- 10000

To Lease Rental Income A/c-10000

(Being provision provided for the year ended)

3. Bank A/c Dr- 10000

To Lease Rent Receivable -10000

(Being rent receivable received)

2.Balance Sheet For the year Ended 2021

Assets	Amount $	Liabilities	Amount $
Lease Rent receivable A/c	10000

Income statement for the Year Ended 2021
Expenditure	Amount $	Income	Amount $
		Lease Rent Amount	10000

ekkarill92 answered 1 year ago

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