Exercise Diff: $2$ Var: $1$ Exercise $2$ Based on the above information, prepare Nice Manufacturing's journal entries at the commencement of the lease, January $1$ and December $31,2019$ payments, and amortization of the right$-$of$-$use asset. Answer: The lease liability is calculated as the present value of the future payments. Using Excel, the present value of the future lease payments, based on a rate of $9\%,10$ periods, payments at the beginning of each period of $$8,000,$ and a $$5,000$ residual value is $$58,074.$ The Excel formula is: $=$PV$(\mathrm{.}09,10,-8000,-5000,1)=$ $$58,074.$ The following entries are made by the lessee during the first year of the lease: On each journal entry, ia required to identify the date for the entry to be recorded in books. Lease commencement: Account January $1,2019$ Prepaid Initial Direct Costs $1,000$ Cash $1,000$ Account January $1,2019$ Right$-$of$-$Use Asset $60,074$ Prepaid Initial Direct Costs $2,000$ Lease Liability $58,074$ Initial payment: Account January $1,2019$ Lease Liability $8,000$ Cash $8,000$End of year payment: Account December $31,2019$ Interest Expense $4,507$ Lease Liability $3,493$ Cash $8,000**$Interest Expense $=9\%($$$58,074-$ $$8,000)$ Amortization of right$-$of$-$use asset: Account December $31,2019$ Amortization Expense$$Right$-$of$-$Use Asset $5,507$ Accumulated Amortization$$Right$-$of$-$Use Asset $5,507$