13 On January 1, 2018, Nath-Langstrom Services, Inc, a computer software trainin

Question

13 On January 1, 2018, Nath-Langstrom Services, Inc, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $13,000 each. payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $96,000 and were expected to have a useful life of Eight years with no residual value. Both firms record amortization and depreciation semi-annually. E o P o . E A S A VADo S and PVAD of $) (Use appropriate factor(s) from the tables provided.) 10 points eBookRequired: Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018. (If no Hint Print References entry is required for a trensactionlevent, select "No journal entry required" in the first account field. Round your intermedae calculations to the nearest whole dollar amount. View transaction list Journal entry worksheet Record the beginning of the lease for Nath-Langstrom Services. Note Enter debits before credits Date General Journal Debit Credit January 01.2018

Explanation / Answer

Journal Entries :-

Working Note 1 :-

Present Value of Lease Payments :-

n = 2*2 = 4

i = 4/2 = 2%

= ($13000 * 3.80773* ) = $49500

* Present Value of an annuity of $1

S. No. Particulars Debit($) Credit($) 1) Right of use asset A/c Dr 49500 To Lease Payable A/c 49500 2) Interest Expense A/c Dr. ($49500*2%) 990 Lease Payable A/c Dr. (Diff.) 12010 To Cash A/c 13000 3) Amortization Expense A/c Dr. ($13000-$990) 12010 To Right of use Asset A/c 12010 4) Interest Expense A/c Dr. (($49500-$12010)*2%) 750 Lease Payable A/c Dr. (Diff.) 12250 To Cash A/c 13000 5) Amortization Expense A/c Dr. ($13000-$750) 12250 To Right of use asset A/c 12250 6) Cash A/c Dr. 13000 To Lease Revenue A/c 13000 (First lease payment) 7) Depreciation Expense A/c Dr. (($96000/8)*2) 24000 To Accu. Deperciation A/c 24000 8) Cash A/c Dr. (Second Leasr Payment) 13000 To Lease Revenue A/c 13000 9) Depreciation Expense A/c Dr.(($96000/8)*2) 24000 To Accu. Depreciation A/c 24000

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