Sheridan Ltd., a public company following IFRS 16, recorded a right-of-use asset

Question

Sheridan Ltd., a public company following IFRS 16, recorded a right-of-use asset and lease liability at $157,500 on May 1, 2017. The interest rate is 9%. Sheridan made the first lease payment of $28,710 on May 1, 2017. The lease requires a total of 7 annual payments. The equipment has a useful life of 7 years with no residual value. Assume that at December 31, 2017, Sheridan made an adjusting entry to accrue interest expense of $7,727 orn the lease. Prepare Sheridan's May 1, 2018 journal entry to record the second lease payment of $28,710. Assume that no reversing entries are made. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit May 1

Explanation / Answer

The following entry will be prepared to record the second lease payment on May 1, 2018:

Interest Expense to be recorded on May 1, 2018, has been calculated as follows:

Decrease in lease liability has been calculated as follows:

Date Account Titles and Explanation Debit Credit May 1 Interest Expense 3,864 Interest Payable 7,727 Lease Liability 17,119             Cash 28,710

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