Recording Lease Obligations Use Table 1 and Table 2 to calculate present value a
ID: 2531065 • Letter: R
Question
Recording Lease Obligations
Use Table 1 and Table 2 to calculate present value answers.
Rigby Corporation has leased a piece of equipment that has a useful life of 12 years. This capital lease requires payments of $86,000 per year for 12 years. Rigby currently is able to borrow money at a long-term interest rate of 15 percent. Round your answers to the nearest dollar.
1. Calculate the present value of the lease agreement.
$
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2. Prepare the journal entry to record the lease agreement.
To record the lease contract
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3. Prepare the journal entry to record depreciation of the equipment for the first year using the straight-line method.
To record depreciation on leased equipment for first year
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4. Prepare the journal entries to record the lease payments for the first two years. If an amount box does not require an entry, leave it blank.
Year 1
Made lease payment for first year
Year 2
Made lease payment for second year
Hide2. Prepare the journal entry to record the lease agreement.
To record the lease contract
Explanation / Answer
Answer 1
Present Value of Lease Rentals
Answer 2
Recording of lease contract:
Answer 3
Recording of depreciation on lease asset for 1st Year
Answer 4
Recording of lease payments for the first two years.
Year 1
Year 2
Lease Liability Payment Schedule:
Year Lease Rentals PVIF @ 15% PV of Lease Rentals 1 86,000 0.8696 74,783 2 86,000 0.7561 65,028 3 86,000 0.6575 56,546 4 86,000 0.5718 49,171 5 86,000 0.4972 42,757 6 86,000 0.4323 37,180 7 86,000 0.3759 32,331 8 86,000 0.3269 28,114 9 86,000 0.2843 24,447 10 86,000 0.2472 21,258 11 86,000 0.2149 18,485 12 86,000 0.1869 16,074 Total 4,66,173Related Questions
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