On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training
ID: 2333749 • Letter: O
Question
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 $15,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $101,000 and were expected to have a useful life of Five years with no residual value. Both firms record amortization and depreciation semi-annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018.
Explanation / Answer
a) Journal Entries in the books of Lessee :-
b) Journal Entries in the books of Lessor :-
Date Particulars Debit($) Credit($) Jan 1 Right of use Asset 59020 To Lease Payable A/c ($15500*3.80773F) 59020 (To record the inception of lease payable) Jun 30 Interest Expense A/c Dr. (2%*$59020) 1180 Lease Payable A/c Dr. 14320 To Cash A/c 15500 (To record the lease payament) Jun 30 Amortization Expense A/c Dr. ($15500-$1180) 14320 To Right of Use Asset A/c 14320 (To Record the amortization Expense) Dec 31 interest Expense A/c Dr. (2%*($59020-$14320)) 894 Lease Payable A/c Dr. 14606 To Cash A/c 15500 (To Record the lease payment) Dec 31 Amortization Expense A/c Dr. ($15500-$894) 14606 To Right of use Asset A/c 14606 (To Record the amortization expense)