Answer and Explanation:
The Journal entries are shown below:-
1. Right of use assets Dr, $371,049
To Lease payable $371,049
(Being lease is recorded)
Working note:-
Present value of periodic lease payment $354,595
($100,000 × (present value of ordinary annuity of $1, n = 4, i = 5%)
($100,000 × 3.54595)
Present value of an estimated cash payment under a residual value
$16,454 (Present value $1, n = 4, i = 5%)
Lease payment = $354,595 + $16,454
= $371,049
2. Amortization expense Dr, ($371,049 ÷ 4 years) $97,262
To Right of use assets $97,262
(Being related to the lease is recorded)
3. Interest expense Dr, (5% × $371,049) $18,552
Lease payable Dr, $81,448
To annual payment of cash $100,000
(Being annual payment of lease is recorded)
