Myers Company signs a lease of an equipment $240,000 for 4 years (straight-line depreciation without any salvage value) on January I and must make payments on the lease on 31 Dec, year 1, year 2, year 3, and year 4.

Interest rate is 10% per annum

a. Prepare the amortization table

b. Prepare the journal entries for Myers Company for January 1, Year 1 AND December 31, Year 1, Year 2, and Year 3, assuming this is an operating lease.

c. Repeat question b, assuming this is a capital lease.

d. Assume that Myers makes annual rental payment of $70,000. Can the company avoid listing this lease as capital lease? Explain fully.

Answer rating: 100% (QA)

The answer is as follows a The amortization schedule is prepared for the lease agreement in case of capital lease The lease rental payment is separated into principal and interest parts to find the ba... View the full answer