Second question journals got clipped twice. On January 1, 2017, Waterway Corpora

Question

Second question journals got clipped twice.

On January 1, 2017, Waterway Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Waterway to make annual payments of $3,092 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Waterway uses the straight-line method of depreciation for all of its plant assets, waterway's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The present value of the minimum lease payments SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: SIMILAR EXERCISE Prepare all necessary journal entries for Waterway for this lease through January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation acslin To record the lease.) (To record first payment.)

Explanation / Answer

1) year cash flows Discount factor @10% present value 0 1 1 8092 0.909090909 7356.363636 2 8092 0.826446281 6687.603306 3 8092 0.751314801 6079.639369 4 8092 0.683013455 5526.944881 5 8092 0.620921323 5024.495346 Present value of the minimum lease payment 30675.04654 2) Date Accounts title and Explanation Debit Credit 1-Jan-18 Lease equipment 30675.05 Lease liabilty 30675.05 ( To record the lease) 1-Jan-18 lease liabilty 8092 Cash 8092 ( To record the cash payment of the lease) 31-Dec-18 Depreciation expenses 6135.01 Accumulated depreciation - capital lease (30675.05/5) 6135.01 ( To record the depreciation on the equipment) 31-Dec-18 interets expenses 2258.305 Interest payable (30675.05-8092)*.10 2258.305 ( To record the interest expense) 1-Jan-19 Lease liability 5833.695 Interest payable (30675.05-8092)*.10 2258.305 Cash 8092 ( To record the payment of lease on equipment along with interest)

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