Watson Co. entered into a lease arrangement for a truck on 1 April 2012 that had the following terms: The lease payments are $13,500 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $3,900 per year. Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,200 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee is $14,000 at the end of the first lease term and $4,700 at the end of the second lease term. The leased asset has a useful life of ten years and a fair value of $63,800. The interest rate implicit in the lease is 9%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:

1-a. Calculate the right-of-use asset. (Round the intermediate and final answer to the nearest whole dollar amount.)

1-b. Record the initial journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar amount.)

2. Prepare a lease liability amortization table for only the first four payments. (Round the intermediate and final answers to the nearest whole dollar amount.)

3. List the items that would appear in the lessee’s SCI for the year ended 31 December 2013. (Round the intermediate and final answers to the nearest whole dollar amount.)

4. What is the amount of the total lease liability on the balance sheet on 31 December 2013? Split this amount into the current and long-term portions. (Round the intermediate and final answers to the nearest whole dollar amount.)

Answer rating: 100% (QA)

Answer 1 a Present value of Lease Payment 12200 x PVAD94 43082 Present value of Lease Payment for fu... View the full answer