Answer:
See the explanation below.
Explanation:
<u>Date Details Dr ($) Cr ($) .</u>
31 Dec. '19 Leased equipment 340,000
Lease liability 340,000
<em><u> To record liability form equipment lease. .</u></em>
31 Dec. '19 Leased liability 54,782
Cash 54,782
<em><u> To record lease payment. .</u></em>
31 Dec. '20 Interest expense 22,817.44
Lease liability 31,964.56
Cash 54,782
<em><u> To record interest expense and lease payment. .</u></em>
31 Dec. '20 Depreciation expense 42,500
Accumulated depreciation - lease 42,500
<em><u> To record right-of -use equipment amortization .</u></em>
Note:
31 Dec. '20 Interest expense = (340,000 - 54,782) * 8% = $22,817.44
31 Dec. '20 Lease liability = $54,782 - $22,817.44 = $31,964.56
31 Dec. '20 Depreciation expense = 340,000 / 8 = $42,500