The following relate to an operating lease agreement a. The lease term is 3 year

Question

The following relate to an operating lease agreement a. The lease term is 3 years, beginning January 1, 2018. b. The leased asset cost the lessor $900,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets C. Annual lease payments at the beginning of each year were $148,500. d. Incremental costs of negotiating costs of negotiating and consummating the completed lease transaction incurred by the lessor were $3,900. Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease term. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Hint Print View transaction list Journal entry worksheet 13 Debit 01, 2018

Explanation / Answer

Answer

1. Lease exp. per year = Incremental cost / Lease period

Lease exp. per year =$3900/3 =$1300

2. Depreciation exp. per year = Total cost / Useful life of asset

Depreciation exp. per year = $900000/8 = $112500

Date Particulars Dr Cr January 1,2011 Cash $148500 Unearned rent income $148500 January 1,2011 Defferred direct cost exp. $3900 Cash $3900 December 31,2018 Unearned rent income $148500 Rent income $148500 December 31,2018 Lease expenses $1300 Defferred direct cost exp. $1300 December 31,2018 Depreciation $112500 Accumulated Depreciation $112500 January 1,2019 Cash $148500 Unearned rent income $148500 December 31,2019 Unearned rent income $148500 Rent income $148500 December 31,2019 Lease exp. $1300 Defferred direct cost exp. $1300 December 31,2019 Depreciation $112500 Accumulated Depreciation $112500 January 1,2020 Cash $148500 Unearned rent revenue $148500 December 31,2020 Lease exp. $1300 Defferred direct cost exp. $1300 December 31,2020 Depreciation $112500 Accumulated Depreciation $112500

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