Answer:
<u>(a) Prepare DU Journeys' journal entries for 2016, 2017, and 2018.</u>
Date Account Title and Explanation Debit($) Credit($)
31/12/2016 Right of Use asset 15,000
Lease Liability 15,000
(to record lease of asset)
31/12/2017 Interest Expense 1,200
Lease Liability 4,352.82
Cash 5,552.82
(to record interest expense and lease payment)
31/12/2017 Amortization Expense 5,000
Right of use Asset 5,000
(to record amortization expense for right of use asset)
31/12/2018 Interest Expense 851.77
Lease Liability 4,978.69
Cash 5,830.46
(to record interest expense and lease payment)
31/12/2018 Amortization Expense 5,000
Right of use Asset 5,000
(to record amortization expense for right of use asset)
Date: 31/12/2016
Annual Payment: -
Interest Expense: -
Reduction of Lease Liability: -
Lease Liability: $15,000
Depreciation Expense: -
Date: 31/12/2017
Annual Payment: $5,552.82
Interest Expense: $1,200
Reduction of Lease Liability: 4352.82
Lease Liability: 10647.18
Depreciation Expense: $5,000
Date: 31/12/2018
Annual Payment: $5,830.46
Interest Expense: 851.7744
Reduction of Lease Liability: 4978.6856
Lease Liability: -44331.5056
Depreciation Expense: $5,000
Date: 31/12/2019
Annual Payment: $6,121.98
Interest Expense: -3546.520448
Reduction of Lease Liability: - 44331.5056
Lease Liability: 0
Depreciation Expense: $5,000
(b) Consumer Price index means: book the same amount year to year for payment. The increase in CPI may be booked as an expense when incurred.
