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1 PS://Verizon gpst. New American Fun... eBook 34 Show Me How Video Determine amortization using the effective interest method (see Exhibit 10-7 below for an example). Column 1 Column 2 Column 3 Column 4 Lease Interest Reduction of Lease Date Payment Expense Obligation Obligation 8% Col. 1 - Col. 2 1/1/2017 $15,972 12/31/2017 $4,000 $1,278 $2,722 13,250 12/31/2018 4,000 1,060 2,940 10,310 12/31/2019 4,000 825 3,175 7,135 12/31/2020 4,000 571 3,429 3,706 12/31/2021 4,000 294 3,706 0 Column 1 is the total amount of the payment. To compute the interest expense, (column 2) multiply the lease obligation (column 4) by the interest rate. Column 3, the reduction of obligation is computed by subtracting Column 2 from column 1 Column 4 starts out a the present value of the lease obligation. This column is then reduced by the amount in column 3. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar. Income Statement Balance Sheet Net Stockholders' Income Equity Expenses Liabilities Revenues Assets 555 -555 Interest Expense -969 0 No Entry V -555 -1,524 Lease Obligation Cash Feedback Check My Work c. Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar. 1,157 d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar. Current liability portion 2,940 X Long-term liability portion 10,310 | X Feedback Previous Next