Financial Statement Impact of a Lease Financial Statement Impact of a Lease On J

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Financial Statement Impact of a Lease

Financial Statement Impact of a Lease On January 1, 2017, Kiger Manufacturing Company leased a factory machine for six years. Annual payments of $21,980 are to be made every December 31 beginning December 31, 2017. Interest expense is based an a rare r 9he presert value of the minimum ease payments is $98.6 0 and has been determined to be greater than 00% the ar mark ef the matin on January 2037. K usest igh, line depredation ? al wet 1. Prepare a table to show the six-year amortization of the lease obligation. Enter all amounts as positive numbers. Round all amounts to the nearest whole dollar. If your answer is zero, enter"0 . Note: Due to rounding you will have to adjust the interest expense for 12/3/O ?, order to result in nem baltice lor the ein obia-tor Kiger Manufacturing Company Effective Interest Method of Amortization Lease payment Interest Expense g% Reduction of Obligation Lease tagabon 1/01/17 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 2. Identify and analyze the effect of the lease transaction on January 1, 2017 Activity Accounts Statement s) How does this entry affect the accounting equation? Previous

Explanation / Answer

Lease Liability Annual Lease payments 21,980.00 Term 6 years Interest 9% PV of MLP   98,600.00 Date Interest @ 9% Principle Total 1/1/2017                     -               -   98,600.00 12/31/2017            8,874.00 13,106.00 85,494.00 12/31/2018            7,694.46 14,285.54 71,208.46 12/31/2019            6,408.76 15,571.24 55,637.22 12/31/2020            5,007.35 16,972.65 38,664.57 12/31/2021            3,479.81 18,500.19 20,164.38 12/31/2022            1,814.79 20,165.21         (0.82) Total           33,279.18 98,600.82

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