Exercise 21-8 RODE COMPANY (Lessee) Lease Amortization Schedule Date Annual Leas

Question

Exercise 21-8

RODE COMPANY (Lessee)
Lease Amortization Schedule

Date

Annual Lease Payment Plus
BPO

Interest on
Liability

Reduction of Lease
Liability

Lease Liability

Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Rode’s annual accounting period ends on December 31. Reversing entries are used by Rode. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.)

Date

Account Titles and Explanation

Debit

Credit

5/1/14

(To record the lease.)

(To record the first lease payment.)

12/31/14

(To To record interest.)

(To record depreciation.)

1/1/15

5/1/15

12/31/15

(To record interest.)

(To record depreciation.)

Exercise 21-8

The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.
Inception date: May 1, 2014 Annual lease payment due at the beginning of    each year, beginning with May 1, 2014 $19,532.19 Bargain-purchase option price at end of lease term $3,790.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $68,800.00 Fair value of asset at May 1, 2014 $83,800.00 Lessor’s implicit rate 10 % Lessee’s incremental borrowing rate 10 %
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

Explanation / Answer

Exercise 21-8
The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and Round answers to 2 decimal places, e.g. 15.25.)

Reduction of Lease
Liability

Exercise 21-8
The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.

Inception date: 1-May-14 Annual lease payment due at the beginning of each year, beginning with May 1, 2014 $19,532.19 Bargain-purchase option price at end of lease term $3,790.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $68,800.00 Fair value of asset at May 1, 2014 $83,800.00 Lessor’s implicit rate 10 % Lessee’s incremental borrowing rate 10 %

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and Round answers to 2 decimal places, e.g. 15.25.)

RODE COMPANY (Lessee)
Lease Amortization Schedule Date Annual Lease Payment Plus
BPO Interest on liability'

Reduction of Lease
Liability

Lease Liability 1/5/14 $83,800 1/5/14 $19,532.19 $19,532.19 $64,267.81 1/5/15 $19,532.19 $6,426.78 $13,105.41 $51,162.40 1/5/16 $19,532.19 $5,116.24 $14,415.95 $36,746.45 1/5/17 $19,532.19 $3,674.65 $15,857.54 $20,888.91 1/5/18 $19,532.19 $2,088.89 $17,443.30 $3,445.61 30/4/19 $3,790 $344.56 $3,445.44 $0.17 $101,450.95 $17,651.12 $83,799.83 b) Date Account Titles and Explanation Debit Credit 1/5/14 Leased Equipment $83,800 Leased Liability $83,800 (To record the lease.) Leased Liability $19,532.19 Cash $19,532.19 (To record the first lease payment.) 31/12/14 Interest Expense($6426.78 x 8/12 $4,284.52 Interest Payable $4,284.52 ( To record interest.) Depreciation($83,800/10 x 8/12 $5,586.67 Accumulated Depreciation $5,586.67 (To record depreciation.) 1/1/15 Interest payable $2,142.26 Interest Expense $2,142.26 1/5/15 Interest Expense $5,166.24 Leased Liability $14,415.95 Cash $19,532.19 31/12/15 Interest Payable($5166.24 x 8/12) $3,444.16 Interest Expense $3,444.16 ( To record interest.) Depreciation($83,800/10 x 8/12 $5,586.67 Accumulated Depreciation $5,586.67 (To record depreciation.) 1/5/15 31/12/15 (To record interest.) (To record depreciation.)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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