son, duseful life Waterworld Company leased equipment from Costner Company. The

Question

son, duseful life Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,732 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,600, an estimated useful life of 4 years, and no salvage value. Waterworld pays all executory costs directly to third parties. The appropriate interest rate is 11%. estimated ntal payments 11%. Brief Exercise 21-2 manually.) Prepare Waterworld's January 1, 2014, journal entries at the inception of the lease. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Credit Debit Date Account Tites and January 1, 2014 (To record the lease.) January 1, 2014 (To record first lease payment.)

Explanation / Answer

Interest Amortization table Years Fare Value Equal Rental Payment at begning of each year outstanding Fare Value Interst@ 11% Outstanding Fare value 1 150600 43732 106868 11755 118623 2 118623 43732 74891 8238 83130 3 83130 43732 39398 4334 43731 4 43731 43732 -1 0 -1 Assets will be classified as financial lease as the life of assets and term of lease is same. Date Account title Debit Credit 01.01.2014 Equipment 150600 Lease Payable 150600 ( being assets taken on lease) 01.01.2014 Lease Payable 43732 Cash 43732 ( Being Lease Retal paid) 01.01.2014 Interest Expenses 11755 Lease Payable 11755 Being Interst Exp Amortize

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