Question

Host Co as a lessor records a sales type lease of machinery on 1/1/19. The 7 annual lease payments of $210,000 are received at the end of each year. The present value of the lease payments at 10% is $1,022,400.

Prepare a lease amortization schedule from 1/1/19 to 12/31/21.

Prepare the journal entries for Host from 1/1/19 to 12/31/20.

SHOW ALL COMPUTATIONS.

Answer 1

	Date	01-01-2019	31-12-2019	31-12-2020	31-03-2021
A	Lease receivable	10,22,400	10,22,400	9,14,640	7,96,104
B	Lease payment	-	2,10,000	2,10,000	2,10,000
C	Interest on lease @ 10% (A*10%)	-	1,02,240	91,464	79,610
D	Priciple amortisation (B-C)	-	1,07,760	1,18,536	1,30,390
	Journal entries
Date	Journal entries	Amt Dr	Amt Cr
	At the beginning of lease
01-01-2019	Lease receivables A/c   Dr	10,22,400
	To Machinery		10,22,400
	(being lease given on lease and pv recorded as receivables)
	Amt received &Interest recognition
31-12-2019	Cash A/c    Dr	2,10,000
	To Lease receivable A/c		1,07,760
	To Interest on lease A/c		1,02,240
	(Being Cash recived is apportioned towards lease payment and interest income
31-12-2020	Cash A/c    Dr	2,10,000
	To Lease receivable A/c		1,18,536
	To Interest on lease A/c		91,464
	(Being Cash recived is apportioned towards lease payment and interest income
31-12-2021	Cash A/c    Dr	2,10,000
	To Lease receivable A/c		1,30,390
	To Interest on lease A/c		79,610
	(Being Cash recived is apportioned towards lease payment and interest income