On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training

Question

On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $16,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $103,000 and were expected to have a useful life of Five years with no residual value. Both firms record amortization and depreciation semi-annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest whole dollar amount.)

Explanation / Answer

FACTS Lease a computer worth $103,000.00 Lease term                  2 yrs Annual payment          54,610 Estimated life of a computer                  5 yrs Effective borrowing rate 4% PRESENT VALUE OF PAYMENTS $103,000 ANNUAL DEPRECIATION $20,600 CAPITAL LEASE OPENING YEAR ONE YEAR TWO YEAR THREE YEAR FOUR Equipment 103,000      Cap lease obligation        103,000      Cash 54,610 54,610 54,610 Interest expense       4,120      2,100         (0) (2,184) Capital lease obligation     50,490    52,510 54,610    2,184 Depreciation expense     25,750    25,750 25,750 25,750      Accumulated depreciation 25,750 25,750 25,750 25,750 OPERATING LEASE Rent expense NO OPENING ENTRY!     54,610    54,610 54,610      Cash 54,610 54,610 54,610 COMPARE EXPENSE OF THE TWO: CAPITAL LEASE OPERATING LEASE      Interest expense      4,036 Rent expense 163,831      Depreciation expense 103,000 107,036 DIFFERENCE BETWEEN THE TWO OVERALL: NONE!!!!

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.