Answer and Explanation:
1. The Preparation of amortization table is shown below:-
<u>Date Rent payment Interest Reduction of Liability
</u>
<u> revenue Principal
</u>
01.01.2017 $0 $0 $0 $87,000
31.12.2017 $33.759 $6,960 $26,799 $60201
(87,000 × 8%)
31.12.2018 $33.759 $4,816 $28,943 $31,258
(60,201 × 8%)
31.12.2022 $33,759 $2,501 $31,258 $0
(32,258 × 8%)
Working note
The computation of the yearly lease amount is shown below:-
Period Table value PV at 8%
1 0.92593
2 0.85734
3 0.79383
Total 2.57710
Lease rent $33.759
($87,000 ÷ 2.5771)
2. The Journal entry is shown below:-
Lease receivable Dr, $87,000
Cost of goods sold Dr, $65,000
To Sales $87,000
To Inventory $65,000
(Being lease commenced is recorded)
3. The Journal entry is shown below:-
ROU assets Dr, (right of use) $87,000
To lease liability $87,000
(Being ROU assets recognized is recorded)
4. ROU assets Dr, (right of use) $96,500
To lease liability $87,000
To Cash $9,500
(Being ROU assets recognized of direct costs is recorded)
