Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Ann

Question

Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,510, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2017.

PV of Annuity of $1

Required:

Refer to the table above for present value factors.

1. Assume that the lease is treated as an operating lease.

a. Will the value of the forklift appear on Koffman's balance sheet? NO

b. What account will indicate that lease payments have been made?
Lease expense
No

c. Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar.
$1250

d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar.

Current liability portion $ Long-term liability portion $

Explanation / Answer

1a. NO.

b. Lease expense

c. Depreciation expense for 2017 for Koffman will be $0 since it is a operating lease, no asset is recognized by Koffman.

d. The lease rental of $1510 will be paid on December 31, 2017 and lease expense recorded. There will thus be no liability pertaining to the lease on December 31, 2017.

Current liability portion $0 Long-term liability portion $0

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

---

---

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