Hi could you please complete both parts :) Harbor (lessee) signs a four-year cap

Question

Hi could you please complete both parts :)

Harbor (lessee) signs a four-year capital lease for office equipment with a $27,000 annual lease payment. The present value of the four annual lease payments is $87,000, based on a 9% interest rate. 1. Prepare the journal entry Harbor will record at inception of the lease. 2. If the leased asset has a four-year useful life with no salvage value, prepare the journal entry Harbor will record each year to recognize depreciation expense related to the leased asset View transaction list Journal entry worksheet 2 Record the journal entry Harbor will record at the inception of the lease. Note: Enter debits before credits. Transaction General Journal DebitCredit Record entry Clear entry View general journal

Explanation / Answer

Question 1

21750

(87000/4) = 21750

Question 2

N=13

I = 1%

Option 1

Down payment 1.0000 0 0

Monthly payments 12.1337 1950 23661

Total present value 23661

Option 2

Down payment 1.0000 6100 6100

Monthly payments 12.1337 1650 20021

Total present value 26121

Option 1

Down payment 1.0000 40500 40500

Monthly payments 12.1337 0 0

Total present value 40500

Option 2 is the best alternative as it has the lowest present value

Transaction Accounts debit credit 1 leased asset- office equipment 87000 Lease liability 87000

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