On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as...

 

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On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a operating lease. The lease requires three $26,486 lease payments (the first at the beginning of the lease and the rest at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $75,100, using a 5.920 % interest rate. The lease payment schedule follows. Date Jan. 1, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 (A) Beginning Balance of Lease Liability $75,100 48, 614 25,006 (0) Credit (B) Debit Interest on Lease Liability Payments (C) Debit 5.920% (A) Lease Liability (0)-(8) Cash Lease $ 0 $26,486 2,878 23, 608 1,480 25,006 26,486 $4,358 $75,100 $79,458 Payment $26, 486 26,486 (E) Ending Balance of Lease Liability (A) (C) $48,614 25,006 0 Required: 1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability. 2. Prepare the January 1 journal entry to record the first $26,486 cash lease payment. 3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3. 4. Prepare the December 31 journal entry to record the $26,486 cash lease payment at the end of (a) Year 1 and (b) Year 2. On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a operating lease. The lease requires three $26,486 lease payments (the first at the beginning of the lease and the rest at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $75,100, using a 5.920 % interest rate. The lease payment schedule follows. Date Jan. 1, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 (A) Beginning Balance of Lease Liability $75,100 48, 614 25,006 (0) Credit (B) Debit Interest on Lease Liability Payments (C) Debit 5.920% (A) Lease Liability (0)-(8) Cash Lease $ 0 $26,486 2,878 23, 608 1,480 25,006 26,486 $4,358 $75,100 $79,458 Payment $26, 486 26,486 (E) Ending Balance of Lease Liability (A) (C) $48,614 25,006 0 Required: 1. Prepare the January 1 journal entry at the start of the lease to record any asset or liability. 2. Prepare the January 1 journal entry to record the first $26,486 cash lease payment. 3. Prepare the December 31 journal entry to record amortization at the end of (a) Year 1, (b) Year 2, and (c) Year 3. 4. Prepare the December 31 journal entry to record the $26,486 cash lease payment at the end of (a) Year 1 and (b) Year 2.