TABLE 19-1 Financial Reporting for Leases Part 1: Preliminary Calculations Lease liability balance Imputed interest expenseb...

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TABLE 19-1 Financial Reporting for Leases Part 1: Preliminary Calculations Lease liability balance Imputed interest expenseb Lease payment Part 2: Reporting an Operating Lease Year 0 $26,730 Year 1 $18,334 $ 1,604 $10,000 Year 2 $ 9,434 $ 1,100 $10,000 Year 3 $ 0 $ 566 $10,000 Lease liability balance Right-of-use asset balance Lease expensed Year 0 Year 1 Year 2 $26,730 $18,334 $ 9,434 $26,730 $18,334 $10,000 $ 9,434 $10,000 Year 3 $ 0 $ 0 $10,000 Part 3: Reporting a Finance Lease Year 0 Year 1 Year 2 Year 3 Lease liability balance $26,730 $18,334 $ 9,434 $ 0 Right-of-use asset balance $26,730 $17,820 $ 8,910 $ 0 Interest expense $ 1,604 $ 1,100 $ 566 Amortization expense $ 8,910 $ 8,910 $8,910 Total lease expense $10,514 $10,010 $9,476 Source: See the file Ch19 Tool Kit.xlsx. Numbers in the table are shown as rounded values for clarity in reporting. However, unrounded values are used for all calculations. Notes: "The lease liability in Year 0 is equal to the initial lease liability. For subsequent years, the lease liability balance is equal to the previous balance plus the imputed interest minus the lease payment. "The imputed interest for the end of Year t is equal to the cost of debt (r.) multiplied by the lease liability payment at the beginning of Year t. "The right-of-use asset balance for an operating lease is equal to the lease liability balance. "The lease expense for an operating lease is equal to the lease payment. "The right-of-use balance for a finance lease is equal to the previous balance minus the amortization charge. 'The interest expense for a finance lease is equal to the imputed interest. *The amortization charge for a finance lease is equal to initial right-of-use asset divided by the number of years of the lease. TABLE 19-1 Financial Reporting for Leases Part 1: Preliminary Calculations Lease liability balance Imputed interest expenseb Lease payment Part 2: Reporting an Operating Lease Year 0 $26,730 Year 1 $18,334 $ 1,604 $10,000 Year 2 $ 9,434 $ 1,100 $10,000 Year 3 $ 0 $ 566 $10,000 Lease liability balance Right-of-use asset balance Lease expensed Year 0 Year 1 Year 2 $26,730 $18,334 $ 9,434 $26,730 $18,334 $10,000 $ 9,434 $10,000 Year 3 $ 0 $ 0 $10,000 Part 3: Reporting a Finance Lease Year 0 Year 1 Year 2 Year 3 Lease liability balance $26,730 $18,334 $ 9,434 $ 0 Right-of-use asset balance $26,730 $17,820 $ 8,910 $ 0 Interest expense $ 1,604 $ 1,100 $ 566 Amortization expense $ 8,910 $ 8,910 $8,910 Total lease expense $10,514 $10,010 $9,476 Source: See the file Ch19 Tool Kit.xlsx. Numbers in the table are shown as rounded values for clarity in reporting. However, unrounded values are used for all calculations. Notes: "The lease liability in Year 0 is equal to the initial lease liability. For subsequent years, the lease liability balance is equal to the previous balance plus the imputed interest minus the lease payment. "The imputed interest for the end of Year t is equal to the cost of debt (r.) multiplied by the lease liability payment at the beginning of Year t. "The right-of-use asset balance for an operating lease is equal to the lease liability balance. "The lease expense for an operating lease is equal to the lease payment. "The right-of-use balance for a finance lease is equal to the previous balance minus the amortization charge. 'The interest expense for a finance lease is equal to the imputed interest. *The amortization charge for a finance lease is equal to initial right-of-use asset divided by the number of years of the lease.