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mod_5_ct_1_answers.xlsx

Lease Amort Schedule

			Bob Evans Farms - Lease Amortization Schedule
Date	Lease Payment		Interest Expense - 12%	Reduction of Lease Liability	Balance of Lease Liability
January 1 2014	-	-	-	-	$400,000
January 1 2014	$ 81,365		-	$ 81,365	$ 318,635
January 1 2015	$ 81,365		$ 38,236	$ 43,129	$ 275,506
January 1 2016	$ 81,365		$ 33,061	$ 48,304	$ 227,202
January 1 2017	$ 81,365		$ 27,264	$ 54,101	$ 173,101
January 1 2018	$ 81,365		$ 20,772	$ 60,593	$ 112,508
January 1 2019	$ 81,365		$ 13,501	$ 67,864	$ 44,644
December 31 2019	$ 50,000.00		$ 5,357	$ 44,643	0
	$ 538,190		$ 138,192	$ 399,998
				Approx $400,000

Prepare the journal entries to record the following.
Jan 1, 14
	Lease Equipment under capital lease	400,000
	Lease Liability		400,000
This is the initial recognition of the leased asset where it is debited as an asset aand the obligations are credited
Jan 1, 14	Lease liability	81,365
	Cash		81,365
we debit the cash paid out for the annual lease payments as we reduce the lease liability by the same amount
31/12/2014	Depreciation expense	66,666
	Accumulated depreciation		66,666
the asset is depreciated for the period it is leased which is 6 years with the fair value of the asset, we recognise this in the income statement as a debit for the depreciation expense
Jan 1, 15	Interest expense	38,236
	Lease liability	43,129
	Cash		81,365
first we credit cash for the annual lease payments, we then account for the interest expense as well as the reduced lease liability
31/12/2015	Depreciation Expense	66,666
	Acc Depreciation		66,666
the asset is depreciated for the period it is leased which is 6 years with the fair value of the asset, we recognise this in the income statement as a debit for the depreciation expense