A capital lease agreement for equipment requires Granger Transport Ltd. to make 10 annual payments of $40,000,
Question:
A capital lease agreement for equipment requires Granger Transport Ltd. to make 10 annual payments of $40,000, with the first payment due on January 2, 2014, the date of the inception of the lease. The present value of the nine future lease payments at 10 percent is $230,360.
Required
1. Calculate the present value of the lease at 10 percent if your instructor has taught present value.
2. Journalize the following lessee transactions: 2014
Jan. 2 Beginning of lease term and first annual payment.
Dec. 31 Amortization of equipment (10 percent).
31 Interest expense on lease liability.
2015 Jan. 2 Second annual lease payment.
3. Assume now that this is an operating lease. Journalize the January 2, 2014, lease payment.
Step by Step Answer:
Accounting
ISBN: 978-0132690089
9th Canadian Edition volume 2
Authors: Charles T. Horngren, Walter T. Harrison Jr., Jo Ann L. Johnston, Carol A. Meissner, Peter R. Norwood