Question

A lease agreement that qualifies as a finance lease calls for annual lease payments of $60,000 over a eight-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 4%. (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: a. Complete the amortization schedule for the first two payments. b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Complete this question by entering your answers in the tabs below. Required A Required B Complete the amortization schedule for the first two payments. (Enter all amounts as positive values. Round your answers to the nearest whole dollar.) Effective Outstanding Balance Lease Decrease in Date Payment Interest Balance January, Year 1 January, Year 1 January, Year 2 Required A Required B

Answer 1

The liability value of the lease payments is recorded in the books of both , lessor as well as leasee , at the present value of future lease payments discounted at the interest rate.

Further , the amount of future lease payments is presented in the balance sheet of the leasee by bifurcating into current and non current liabilities.

The detailed answer is given in the images below.

Dare Leal Inrest dicread Tor closing year! 60.000 60.000 3,60,123 (0) 3.00, 123. Year 2 60,000 12,005 47,995 2.52,128 Note 7 3,60,123 z 60.000 (+) PUAF(44,8 years). As 1st fiest day, installment intrest is is O. being paid on

Date 2 Total year endo Dove liability at = 3,60,123 liability at = 3,00 123 Total year! year end I year! Total i liability at z 2,52, 128 year end 2 od year 2 Amount Balance sheet, - Presented in leasee's t Current liability = 3,00,123 (-) 2,52,128 (tl 12,005 60,000 Non Current liability = 2,40,123.