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    IA2 Exercise 8

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    Reign Tambasacan
    The document contains accounting records for a lease agreement between a lessee and lessor. The lessee leased equipment for $600,000 and is making annual payments of $137,933.26 over 5 years. The records show the allocation of each payment between interest and principal reductions for both parties over the term of the lease. Depreciation expense is also recorded annually for the lessee using the sum-of-the-years-digits method.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    IA2 Exercise 8

    Uploaded by

    Reign Tambasacan
    36 views8 pages
    The document contains accounting records for a lease agreement between a lessee and lessor. The lessee leased equipment for $600,000 and is making annual payments of $137,933.26 over 5 years. The records show the allocation of each payment between interest and principal reductions for both parties over the term of the lease. Depreciation expense is also recorded annually for the lessee using the sum-of-the-years-digits method.

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    Leases

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    The document contains accounting records for a lease agreement between a lessee and lessor. The lessee leased equipment for $600,000 and is making annual payments of $137,933.26 over 5 years. The records show the allocation of each payment between interest and principal reductions for both parties over the term of the lease. Depreciation expense is also recorded annually for the lessee using the sum-of-the-years-digits method.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    36 views8 pages

    IA2 Exercise 8

    Uploaded by

    Reign Tambasacan
    The document contains accounting records for a lease agreement between a lessee and lessor. The lessee leased equipment for $600,000 and is making annual payments of $137,933.26 over 5 years. The records show the allocation of each payment between interest and principal reductions for both parties over the term of the lease. Depreciation expense is also recorded annually for the lessee using the sum-of-the-years-digits method.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    BOOK OF LESSEE (CHRIS TUCKER)

    Fair Value of Asset 600,000


    Less: PV of BPO (40,000 x 0.62092132305) 24,836.85
    PV of periodic payment 575,163.15
    PV Factor of annuity 4.16986544645
    Annual Payment 137,933.26

    1/1/2022
    Right-of-use equipment 600,000
    Cash 137.933.26
    Lease Liability 462,066.74

    12/31/2022
    Depreciation Expense 165,714.29
    Accumulated Depreciation - ROU 165,714.29

    Interest Expense 46,206.67


    Lease Liability 46,206.67

    1/1/2023
    Lease Liability 137,933.26
    Cash 137,933.26

    12/31/2023
    Depreciation Expense 138,095.24
    Accumulated Depreciation - ROU 138,095.24

    Interest Expense 37,034.02


    Lease Liability 37,034.02

    BOOK OF LESSOR (JACKIE CHAN LEASING)

    Gross Investment of the Lease:


    Lease Payment on commencement date 137,933.26
    Lease Payment not yet collected 551,733.04
    BPO 40,000
    729,666.30
    Less: Net Investment of the Lease:
    Lease Payment on commencement date 137,933.26
    PV of lease not yet collected 437,229.87
    PV of BPO 24,836.85
    600,000.00
    Discount on Finance Lease Receivable 129,666.30

    1/1/2022
    Cash 137,933.26
    Finance Lease Receivable 591,730.04
    Cost of Goods Sold 600,000
    Sales 462,066.72
    Discount on finance lease receivable 129,666.30
    Finished Goods Inventory 600,000

    12/31/2022
    Discount on Finance Lease Receivable 46,206.67
    Interest Revenue 46,206.67

    1/1/2023
    Cash 137,933.26
    Finance Lease Receivable 137,933.26

    12/31/2023
    Discount on Finance Lease Receivable 37,034.02
    Interest Revenue 37,034.02
    BOOK OF LESSEE

    REDUCTION IN
    PRINCIPAL
    DATE ANNUAL PAYMENT APPLIED INTEREST OBLIGATION LEASE LIABILITY
    1/1/2022 462,066.74
    1/1/2023 137,933.26 46,206.67 91,726.59 370,340.15
    1/1/2024 137,933.26 37,034.02 100,900.24 269,439.91
    1/1/2025 137,933.26 26,943.99 110,989.27 158,450.64
    1/1/2026 137,933.26 15,845.06 122,088.20 36,362.44
    12/31/2026 40,000 3,636.24 36,363.76 1.32

    BOOK OF LESSOR
    REDUCTION TO
    DATE ANNUAL PAYMENT APPLIED INTEREST INVESTMENT NET INVESTMENT
    1/1/2022 462,066.72
    1/1/2023 137,933.26 46,206.67 91,726.59 370,340.13
    1/1/2024 137,933.26 37,034.02 100,900.24 269,439.18
    1/1/2025 137,933.26 26,943.99 110,989.27 158,449.91
    1/1/2026 137,933.26 15,845.00 122,088.26 36,362.00
    12/31/2026 40,000 3,636.20 36,363.80 1.8
    SUM OF THE YEAR DEPRECIATION

    BOOK VALUE TOTAL COST DEPRECIATION


    YEAR YEAR START DEPRECIABLE PERCENT
    2022 600,000 580,000 28.57%
    2023 434,285.71 580,000 23.81%
    2024 296,190.47 580,000 19.05%
    2025 185,714.28 580,000 14.29%
    2026 102,857.14 580,000 9.52%
    2027 47,619.04 580,000 4.76%

    SOLUTION:

    600,000 - 20,000 = 580,000

    SUM OF THE YEAR:


    6+5+4+3+2+1 = 21
    YEAR
    1 6./21
    2 5./21
    3 4./21
    4 3.21
    5 2./21
    6 1./21

    2022 2025
    580,000 X 6/21 = 165,714.29 580,000 X 3/21 = 82,857.14
    (600,000 - (185,714.28-
    165,714.29) = 434,285.71 82,857.14) = 102,857.14
    414,286.72 + 82, 857.14 =
    2023 497,142.86
    580,000 X 5/21 = 138,095.24
    (434,285.71 - 138,095.24) = 2026
    296,190.47 580,000 X 2/21 = 55,238.09
    165,714.29 + 138,095.24 = (102.857.14 - 55,239.09) =
    303,809.53 47,619.04
    497,142.86 + 55,238.09 =
    2024 552,380.96
    580,000 X 4/21 = 110,476.19
    (296,190.47 - 110,476.19) = 2027
    185,714.28 580,000 X 1/21 = 27,619.05
    303,809.53 + 110,476.19 = (47,619.05 - 27,619.05) =
    414,286.72 20,000
    552,380.96 + 27,619.05 =
    580,000
    DEPRECIATION ACCUMULATED BOOK VALE YEAR
    EXPENSE DEPRECIATION END
    165,714.29 165,714.29 434,285.71
    138,095.24 303,809.53 296,190.47
    110,476.19 414,285.72 185,714.28
    82,857.14 497,142.86 102,857.14
    55,238.09 552,380.96 47,619.04
    27,619.05 580,000 20,000

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