Brief Exercise 20-20 Blossom Corp. agreed to lease property from waterway Corp.

Question

Brief Exercise 20-20 Blossom Corp. agreed to lease property from waterway Corp. effective January 1, 2017, for an annual payment of $24,963, beginning January 2017. The property is made up of land with a fair value of $118,000 and a two-storey office building with a fair value of $172,000 and a useful life of 23 years with no residual value. The implicit interest rate is 7.5%, the lease term is 23 years, and title to the property is transferred to Blossom at the end of the lease term. Prepare the required entries made by Blossom Corp. on January 1, 2017 and at its year end of December 31, 2017. Both Blossom and Waterway use ASPE. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to o decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record inception of lease) (To record first lease payment) (To record accrued interest)

Explanation / Answer

Date Particulars debit credit Jan-01 leased Land & building 290000 Lease liability 290000 Jan-01 Lease Liability 24963 bank 24963 31-12-2017 Accrued Interest 21750 Lease liability 21750 31-12-2017 Depreciation 12609 Leased land and building 12609

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