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 $19,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computerworld at a cost of $109,000 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. (If no entry Is required for a transaction/event, select "No journal entry required in the first account field. Round your Intermediate calculations to the nearest whole dollar amount.)

Answer 1

Nath Langstrom Services Inc. (Lessee) on january 1,2018
Lease Payable = $ 19,500 * 3.80773 = $ 74,251
Present value of Annuity , N= 4 payments , i= 2 % is 3.80773
(Lessee point of view )
Date	General Journal	Debit	Credit
January 1,2018	Right of use asset	$ 74,251
	Lease payable		$ 74,251
	(To record Right of use assets at beginning )
June 30,2018	Interest expense ($74,251*2%)	$ 1,485
	Lease payable ($19,500 - $ 1,485 )	$ 18,015
	Cash		$ 19,500
	(To record lease payment )
June 30,2018	Amortization expense	$ 18,015
	Right of use asset		$ 18,015
	(To record Amortization expense )
December 31,2018	Interest expense ($74,251-$18,015)*2%)	$ 1,125
	Lease payable ($19,500 - $ 1,125 )	$ 18,375
	Cash		$ 19,500
	(To record lease payment )
December 31,2018	Amortization expense	$ 18,375
	Right of use asset		$ 18,375
	(To record Amortization expense )

(Lessor point of view )
Date	General Journal	Debit	Credit
January 1,2018	No Journal Entry
	(To record Right of use assets at beginning )
June 30,2018	Cash	$ 19,500
	Lease Revenue		$ 19,500
	(To record cash received for lease )
June 30,2018	Depreciation expense (109,000/ 5 years* 6/12 months )	$ 10,900
	Accumulated Depreciation		$ 10,900
	(To record Depreciation expense for 6 Months )
December 31,2018	Cash	$ 19,500
	Lease Revenue		$ 19,500
	(To record cash received for lease )
December 31,2018	Depreciation expense (109,000/ 5 years* 6/12 months )	$ 10,900
	Accumulated Depreciation		$ 10,900
	(To record Depreciation expense for 6 Months )