Annual lease payments
20,000
$
4%
5 yr
Complete amortization schedule for the first two payments
Lease liability and Interest payable reported on balance sheet
$92,598
Date
Lease payment
Effective interest
Decrease in balance
Outstanding balance
Jan 1 Yr 1
92,598
$
Jan 1 Yr 1
20,000
$
-
$
20,000
$
72,598
$
Jan 1 Yr 2
20,000
$
2,904
$
17,096
$
55,502
$
Jan 1 Yr 3
20,000
$
2,220
$
17,780
$
37,722
$
Jan 1 Yr 4
20,000
$
1,509
$
18,491
$
19,231
$
Jan 1 Yr 5
20,000
$
769
$
19,231
$
-
$
Lease Liability
72,598
$
92598-20000
Interest Payable
2,904
$
4%*(92598-20000)
Lease payments
50,000
$
8%
4 years
PV factors based on
20,000
$
4%
5 years
Table or Calculator function
PVAD of $1
Lease Payment
50,000
$
n=
4
i=
8%
PV of lease
178,855
$
Amortization expense
44,714
$
Interest expense
10,308
$
18519.6
Date
Lease payment
Effective interest
Decrease in balance
Outstanding balance
Jan 1 Yr 1
178,855
$
20,000
$
Jan 1 Yr 1
50,000
$
-
$
50,000
$
128,855
$
5
Jan 1 Yr 2
50,000
$
10,308
$
39,692
$
89,163
$
4%
Jan 1 Yr 3
50,000
$
7,133
$
42,867
$
46,296
$
92,598
$
Jan 1 Yr 4
50,000
$
3,704
$
46,296
$
0
$
178855/4
Quartly payments
29,000
$
8 yr operating lease
32,000
$
9 yr operating lease
Cost
2,400,000
$
2,700,000
$
Useful life
30
30
LTT
reduces
its earning by
116,000
$
32 payments
116,000
$
29000*4
128,000
$
Quarterly payments
43,000
$
10 yr operating lease
26,000
$
8 yr operating lease
Cost
3,800,000
$
2,100,000
$
Useful life
25
30
Lakeside
increases
its earnings by
20000
172000-152000
43000*4
172000
104000
3800000/25
152000
70000
Lease term
2
Payment date
Lease payments
Effective interest
Quarterly payments
15,500
$
1/1/2024
Useful life
2
1/1/2024
15,500
$
-
$
FV of asset
115,816
$
4/1/2024
15,500
$
2,006
$
Implicit interest rate
8%
7/1/2024
15,500
$
1,736
$
10/1/2024
15,500
$
1,461
$
Total Lease payments
124,000
$
1/1/2025
15,500
$
1,180
$
Payment amount
15,500
$
4/1/2025
15,500
$
894
$
n
8
7/1/2025
15,500
$
602
$
i
2.00%
10/1/2025
15,500
$
304
$
PVAD
$113,544.96
124,000
$
8,184
$
Lease term
2
Payment date
Lease payments
Effective interest
Quarterly payments
16,700
$
1/1/2024
Useful life
2
1/1/2024
16,700
$
-
$
FV of asset
124,782
$
4/1/2024
16,700
$
2,162
$
Implicit interest rate
8%
7/1/2024
16,700
$
1,871
$
10/1/2024
16,700
$
1,574
$
Total Lease payments
133,600
$
1/1/2025
16,700
$
1,272
$
Payment amount
16,700
$
4/1/2025
16,700
$
963
$
n
8
7/1/2025
16,700
$
648
$
i
2.00%
10/1/2025
16,700
$
328
$
PVAD
$122,335.54
133,600
$
8,818
$
Decrease balance
Lease balance
1/1/2024
Lease receivable
115,816
$
Equipment
15,500
$
100,316
$
13,494
$
86,822
$
1/1/2024
Cash
13,764
$
73,059
$
Lease receivable
14,039
$
59,020
$
14,320
$
44,700
$
4/1/2024
Cash
14,606
$
30,094
$
Interest revenue
14,898
$
15,196
$
Lease receivable
15,196
$
-
$
115,816
$
7/1/2024
Cash
Interest revenue
Decrease balance
Lease balance
Lease receivable
124,782
$
16,700
$
108,082
$
10/1/2024
Cash
14,538
$
93,544
$
Interest revenue
14,829
$
78,715
$
Lease receivable
15,126
$
63,589
$
15,428
$
48,161
$
12/31/2024
Interest receivable
15,737
$
32,424
$
Interest revenue
16,052
$
16,372
$
16,372
$
-
$
1/1/2025
Cash
124,782
$
Interest receivable
Lease receivable
115,816
$
115,816
$
15,500.00
$
15,500.00
$
15,500
$
2,006
$
13,494
$
15,500
$
1,736
$
13,764
$
15,500
$
1,461
$
14,039
$
1,180
$
1,180
$
15,500
$
1,180
$
14,320
$
Lease term
2
2
Quarterly payments
18,000
$
16,500
$
Useful life
2
2
FV of asset
132,289
$
123,288
$
Implicit interest rate
10%
8%
Equipment cost
101,000
$
100,000
$
Record lease
Record cash received
Record cash received
Date
Lease payment
Effective Interest
Decrease Outstanding Balance
1/1/2024
1/1/2024
18,000
$
-
$
18,000
$
4/1/2024
18,000
$
2,857
$
15,143
$
Date
Lease payment
Effective Interest
Decrease Outstanding Balance
1/1/2024
1/1/2024
16,500
$
-
$
16,500
$
4/1/2024
16,500
$
2,136
$
14,364
$
PV factors
1/1/2024
Lease receivable
Table or Calculator
PVAD
PVAD
Cost of goods sold
PV of Lease
132,289
$
123,288
$
Sales revenue
n
8
8
Equipment
i
2.5%
2.0%
Lease Payment
18,000
$
16,500
$
1/1/2024
Cash
Lease receivable
4/1/2024
Cash
Interest revenue
Lease receivable
Outstanding Balance
132,289
$
114,289
$
99,146
$
Outstanding Balance
123,288
$
106,788
$
92,424
$
132,289.00
$
101,000.00
$
132,289.00
$
101,000.00
$
18,000.00
$
18,000.00
$
18,000.00
$
2,857.00
$
15,143.00
$
Quarterly payments
147,871
$
171,219
$
Mid-South Urologists Group
Lease term
5
5
Physicians' Leasing
Residual value
-
$
-
$
Useful life
5
5
Implicit interest rate
16%
16%
FV of asset
2,090,000
$
2,420,000
$
How should lease be classified
entries for both lessee and lessor
Cost of equipment
1,800,000
$
2,100,000
$
Record lease
Record cash payment
Record cash payment
Record lease
Record cash received
Record cash received
Record lease
Record cash received
Record cash received
Finance lease
1/1/2024
Right-of-use asset
2,090,000
$
Sales-type lease
Lease payable
2,090,000
$
1/1/2024
Lease payable
147,871
$
Cash
147,871
$
4/1/2024
Interest expense
77,685
$
Lease payable
70,186
$
Cash
147,871
$
1/1/2024
Lease receivable
2,090,000
$
Equipment
1/1/2024
Cash
147,871
$
Lease receivable
4%*(2090000-147871)
12/31/2024
Cash
147,871
$
Lease receivable
Interest revenue
89951.24
1/1/2024
Lease receivable
2,090,000
$
2,090,000
$
Cost of goods sold
1,800,000
$
Sale revenue
2,090,000
$
Equipment
1,800,000
$
147,871
$
1/1/2024
Cash
147,871
$
Lease receivable
147,871
$
70,186
$
77,685
$
12/31/2024
Cash
147,871
$
Lease receivable
70,186
$
Interest revenue
77,685
$
Interest
10%
8%
1/1/2024
No entry
Equipment (12/31/23)
101,000
$
95,000
$
Annual Payments
9,100
$
6 yr
8500
6 yr
Useful life
15 yrs
15 yrs
12/31/2024
Cash
Option to terminate after 4 yrs
Record beginning of lease
Record lease revenue
Change lease term
Appropriate entry
1/1/2025
No entry
9,100
$
Lease revenue
9,100
$
12/31/2025
Cash
9,100
$
Lease revenue
9,100
$
Purchase plane
570,000
$
550,000
$
Lahiri
Sales-type lease
FV
828,269
$
771,147
$
Red Baron
Finance lease
8 Annual payments
145,000
$
135,000
$
Implicit interest rate
11%
11%
Useful life
8 yrs
8 yrs
Incremental borrowing rate
12%
12%
Incremental costs
17,965
$
16,403
$
How should lease be classified
Entries for both on 1/1/24
Beginning of lease for Red Baron
Lease payment for Red Baron
Beginning of lease for Lahiri
Initial direct costs for Lahiri
Cash received on lease for Lahiri
Amortization schedule for both
Appropriate entries for 12/31/24
Lease payment for Red Baron
Amortization expense for Red Baron
Cash received by Lahiri
Appropriate entries for 12/31/30
Lease payment for Red Baron
Amortization expense for Red Baron
Cash received by Lahiri
1/1/2024
Right-of-use asset
828,269
$
Lease payable
828,269
$
1/1/2024
Lease payable
145,000
$
Cash
145,000
$
1/1/2024
Lease receivable
828,269
$
Cost of goods sold
570,000
$
Sales revenue
828,269
$
Equipment
570,000
$
1/1/2024
Selling expense
17,965
$
Cash
17,965
$
1/1/2024
Cash
145,000
$
Lease receivable
145,000
$
Date
Payments
Effective Interest
Decrease in Balance
1/1/2024
145,000
$
-
$
145,000
$
12/31/2024
145,000
$
75,160
$
69,840
$
12/31/2025
145,000
$
67,477
$
77,523
$
12/31/2026
145,000
$
58,950
$
86,050
$
12/31/2027
145,000
$
49,484
$
95,516
$
12/31/2028
145,000
$
38,977
$
106,023
$
12/31/2029
145,000
$
27,315
$
117,685
$
12/31/2030
145,000
$
14,368
$
130,632
$
Total
1,160,000
$
331,731
$
828,269
$
Date
Payments
Effective Interest
Decrease in Balance
1/1/2024
135,000
$
-
$
135,000
$
12/31/2024
135,000
$
69,976
$
65,024
$
12/31/2025
135,000
$
62,824
$
72,176
$
12/31/2026
135,000
$
54,884
$
80,116
$
12/31/2027
135,000
$
46,071
$
88,929
$
12/31/2028
135,000
$
36,289
$
98,711
$
12/31/2029
135,000
$
25,431
$
109,569
$
12/31/2030
135,000
$
13,377
$
121,623
$
Total
1,080,000
$
308,853
$
771,147
$
Outstanding Balance
12/31/2024
Interest expense
75,160
$
828,269
$
Lease payable
69,840
$
683,269
$
Cash
613,429
$
535,906
$
12/31/2024
Amortization expense
103,534
$
449,855
$
Right-of-use asset
354,339
$
248,317
$
12/31/2024
Cash
145,000
$
130,632
$
Lease receivable
-
$
Interest revenue
828269/8
103,534
$
Outstanding Balance
771,147
$
96393.375
636,147
$
571,123
$
498,947
$
418,831
$
329,902
$
231,191
$
121,623
$
-
$
12/31/2030
Interest expense
Lease payable
145,000
$
Cash
12/31/2030
Amortization expense
103,534
$
Right-to-use asset
12/31/2030
Cash
69,840
$
Lease receivable
75,160
$
Interest revenue
14,368
$
130,632
$
145,000
$
103,534
$
103,534
$
145,000
$
130,632
$
14,368
$
