Question: Rogers Company signs a five year capital lease with Packer Company

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%.

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.

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.

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  • CreatedNovember 26, 2013
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