Exercise 21-8 (Part Level Submission) The following facts pertain to a noncancel

Question

Exercise 21-8 (Part Level Submission) The following facts pertain to a noncancelable lease agreement between Metlock Leasing Company and Bonita Company, a lessee. May 1, 2017 Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $18,727.72 $4,000 5 years 10 years $62,000 $82,000 9% 9 % 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. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0). Click here to view factor tables (c) Your answer is correct. Prepare a lease amortization schedule for Bonita Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.) BONITA COMPANY (Lessee) Lease Amortization Schedule

Explanation / Answer

Date account titles and explanation debit credit 5/1/17 capital lease 82000 Lease liability 82000 (to record the lease) 5/1/17 lease liability 18727.72 Cash 18727.72 (to record the first lease payment) 12/31/17 interest expense (5694.51*8/12) 3796.34 Interest payable 3796.34 (to record interest) 12/31/17 depreciation expense (82000/10*8/12) 5466.67 Accumulated depreciation - capital leases 5466.67 (to record depreciation) 1/1/18 interest payable 3796.34 Interest expense 3796.34 5/1/18 interest expense 5694.51 Lease liability 13033.21 Cash 18727.72 12/31/18 interest expense (4521.52*8/12) 3014.35 Interest payable 3014.35 (to record interest) 12/31/18 depreciation 8200 Accumulated depreciation - capital lease (82000/10) 8200 (to record depreciation)

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