How to solve this problem ? LESSEE LE-1: Sarah Conner Company leases nonspeciali

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How to solve this problem ?

LESSEE LE-1: Sarah Conner Company leases nonspecialized medical equipment with a fair value of $195,000 from McGill Co. The lease term is for 5 years and commences on January 1, 2019. The estimated economic life of the equipment is 10 years. Sarah Conner $20,000 on December 15, 2018 (the inception date) and received $28,800 from McGill Co on the inception date to terminate a lease from another lessor. Sarah Conner must pay five additional rental fees of $20,00oo each year beginning on January 1, 2019. The second payment is due on December 31, 2019 id the first rental payment of Thereafter, each payment is due on December 31, The implicit rate in the lease is 4%. Sarah Conner incurred initial direct costs prior to the lease commencement of $3,500 that it originally recorded as prepaic ownership or a purchase option. Instructions: id initial direct costs. The lease agreem ent does not contain a transfer of a) How would the lessee measure and record the lease liability and the right-of-use asset? b) Prepare an amortization schedule for the term of the lease to be used by Sarah Conner Company Prepare the journal entries on Sarah Conner Company's books to record the payments and expenses related to this lease for the years 2019 to 2023 c)

Explanation / Answer

This problem constitutes of Opearting lease since the lease agreement does not contain any clause for transfer of ownership or a purchase option

Answer to qns 1(a) : Lessee shall measure lease payments excluding cost of services on straight line basis over the lease term on a systematic basis or payments are structured to increase in line with expected general inflation to compensate the lessor for inflationary cost increases.

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