Question

Windsor Corporation recorded a right-of-use asset for $240,300 as a result of a finance lease on December 31, 2016. Windsor’s incremental borrowing rate is 13%, and the implicit rate of the lessor was not known at the commencement of the lease. Windsor made the first lease payment of $41,440 on on December 31, 2016. The lease requires 9 annual payments. The equipment has a useful life of 9 years with no residual value.

Prepare Wndor's December 31,2017, entries.

Answer 1

--------------------------------------------------------------------------------------------------------------------------

Date	Particular	Debit ($)	Credit ($)
31-Mar	Account Payable Dr	36673
	Interest Expense Dr	4767
	Bank Cr		41440
31-Mar	Depreciation Expense Dr	26700
	Asset Cr		26700

Working note

year	Lease rentals	Discount factor @ 13%	Present value	Interest Expense
0	$41,440	1	$41,440	$0
1	$41,440	0.88496	$36,673	$4,767
2	$41,440	0.78315	$32,454	$8,986
3	$41,440	0.69305	$28,720	$12,720
4	$41,440	0.61332	$25,416	$16,024
5	$41,440	0.54276	$22,492	$18,948
6	$41,440	0.48032	$19,904	$21,536
7	$41,440	0.42506	$17,614	$23,826
8	$41,440	0.37616	$15,588	$25,852
Total			$2,40,301

--------------------------------------------------------------------------------------------------------------------------

Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.