Accounting for Leases On July 1, 2017, Shroff Company leased a warehouse buildin

Question

Accounting for Leases

On July 1, 2017, Shroff Company leased a warehouse building under a 15-year lease agreement. The lease requires quarterly lease payments of $5,000. The first lease payment is due on September 30, 2017. The lease was reported as a capital lease using a 6% annual interest rate.

Required

a. Prepare a financial statement effects template to show the effects of recording the initial signing of the lase on July 1, 2017 and the necessary entries on September 30 and December 31, 2017.

Balance Sheet Transaction Cash Asset + Noncash Assets - Contra-Assets = Liabilities + Contrib. Capital + Earned Capital 7/1/17 Signed a capital lease $Answer + $Answer - $Answer = $Answer + $Answer + $Answer 9/30/17 Depreciation on leased asset Answer + Answer - Answer = Answer + Answer + Answer 9/30/17 Made quarterly lease payment Answer + Answer - Answer = Answer + Answer + Answer 12/31/17 Depreciation on leased asset Answer + Answer - Answer = Answer + Answer + Answer 12/31/17 Made quarterly lease payment Answer + Answer - Answer = Answer + Answer + Answer Income Statement
Revenue
-
Expenses
=
Net Income $Answer - $Answer = $Answer Answer - Answer = Answer Answer - Answer = Answer Answer - Answer = Answer Answer - Answer = Answer

Explanation / Answer

Workings:

Calculation of the fair value of the lease

Lease payment schedule for 2017 and 2018

Transaction Cash asset + Non cash asset - Contra asset = Liabilities + Contributed Capital + Earned Capital Revenue - Expenses = Net income 7/1/17 Signed a capital lease 196901 196901 9/30/17 Depreciation on leased asset 3282 -3282 3282 -3282 9/30/17 made quarterly lease payment -5000 -2046 -2954 2954 -2954 12/31/17 Depreciation on leased asset 3282 -3282 3282 -3282 12/31/17 made quarterly lease payment -5000 -2077 -2923 2923 -2923

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