The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Shigeki Company, a
Question:
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Shigeki Company, a lessee.
The lessee assumes responsibility for all executory costs, which are expected to amount to €5,000 per year.
The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of €50,000. The lessee uses the straight-line depreciation method for all equipment.
Instructions (Round all numbers to the nearest euro.)
(a) Prepare an amortization schedule that would be suitable for the lessee for the lease term.
(b) Prepare all of the journal entries for the lessee for 2015 and 2016 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31 and reversing entries are used when appropriate.
Step by Step Answer:
Intermediate Accounting IFRS Edition
ISBN: 9781118443965
2nd Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield