Question

Company A leases equipment from Company B. Lease payments of $2,867 are due quarterly over a 8 year period, with the first payment due July 1, the beginning of the lease. The annual interest rate is 4%.

What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment on October 1?  

What is the outstanding balance in the Lease Payable account after the second payment?  

What is the outstanding balance in the Right-of-Use asset account after the second payment?  

Round to the nearest whole dollar. (Format $XX,XXX)

Answer 1

1. Amount of interest expense the lessee would record in conjunction with the second quarterly payment on October 1 will be $761

2. Outstanding balance in the Lease Payable account after the second payment $73,991

3. Outstanding balance in the Right-of-Use asset account after the second payment will be $78,964 which will be depreciated over its useful life.

OPENING LEASE EFFECTIVE DECREASE IN OUTSTANDING DATE BALANCE PAYMENT INTEREST BALANCE BALANCE July 1 78964 July 1 $78,964 $2,867 $2,867 $76,097 Oct 1 $76,097 $2,867 $761 $2,106 $73,991

are So Lease amount be Payments to be made cat beginning of period , coil present.value of alllease payonents. P.y of annzity dree: Girn :. PMT I )۔ X (ltr) r AMI lease payment 11 $2867 e = 47. P. a. alu 1 % e atr x 4otr 32 8 years. I I I ( 28 67 x (1.01)32 ILOI 001 2867 x 0.7273 eli x 101, OOL 2867X27.26958_XLOL $__78,964 CS Scanned with CamScanner

nd payment $ Ist paymentie 2 opening () Payment 78,964 62.867) 76,097 (2 867) - and payment. i 73.230 + Interest (76097 x 0.01) 761 ortstunding 73991 CS Scanned with CamScanner
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