In: Accounting
Concord Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6 annual payments of $37,100 each, beginning December 31, 2016. In addition, Concord guarantees the lessor a residual value of $20,900 at the end of the lease. However, Concord believes it is probable that the expected residual value at the end of the lease term will be $10,900. The equipment has a useful life of 6 years.
Prepare Concords' December 31, 2016, journal entries assuming the implicit rate of the lease is 10% and this is known to Concord. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
| Date | Account Titles and Explanation | Debit | Credit |
| December 31, 2016 | Right-of-Use Asset | ||
| Lease Liability | |||
| (To record the lease liability) | |||
| December 31, 2016 | Lease Liability | 37,100 | |
| Cash | 37,100 | ||
| (To record lease payment) |
I need help on finding both the credit and debit of Right-of-Use Asset and Lease Liability please. Please show work as well, Thank you! Be safe out there!
| Date | Account Titles and Explanation | Debit | Credit |
| 31-Dec-16 | Right-of-Use Asset | $ 183,383.01 | |
| Lease Liability | $ 183,383.01 | ||
| (To record the lease liability) | |||
| 31-Dec-16 | Lease Liability | 37,100 | |
| Cash | 37,100 | ||
| (To record lease payment) | |||
| Capitalized amount $37,100 × Present value of an annuity due of 1 for 6 periods at 10% |
|||
| Residual value = ($20900 -$10,900) x PV(6, 10%) | |||
| Capitalized amount $37,100 × 4.79079 |
$ 177,738.31 | ||
| Residual value = ($20900 -10900) x .56447 | $ 5,644.70 | ||
| Lessee’s lease liability/right-of use asset | $ 183,383.01 |