Rogers Company signs a five-year capital lease with Packer Company for office equipment. The annual lease payment

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Rogers Company signs a five-year capital lease with Packer Company for office equipment. The annual lease payment is $ 10,000, and the interest rate is 8%.


Required

1. Compute the present value of Roger’s five-year lease payments.

2. Prepare the journal entry to record Roger’s capital lease at its inception.

3. Complete a lease payment schedule for the five years of the lease with the following headings. Assume that the beginning balance of the lease liability (present value of lease payments) is $ 79,854.


Rogers Company signs a five-year capital lease with Packer Company


4. Use straight-line depreciation and prepare the journal entry to depreciate the leased asset at the end of year 1. Assume zero salvage value and a five- year life for the officeequipment.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Fundamental accounting principle

ISBN: 978-0078025587

21st edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

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