Q11E_a
Expertverified(Amortization Schedule and Journal Entries for Lessee) Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Plote Company. The following information relates to this agreement.
Instructions
(Round all numbers to the nearest cent.)
The total reduction of the lease liability is $75,653.56
The amortization of a leased asset is determined by the asset's historical cost, expected economic life, residual value, and the amortization method chosen. Most finance leases are amortized using consistent payments over the lease period and are customized to meet the lessee's specific needs.
PLOTE COMPANY (Lessee)Lease Amortization Schedule  
Date  Annual Lease Payment  Interest (10%) On Liability  Reduction of the Lease liability  Lease Liability 
1/1/17 


 $75,653.56 
1/1/17  $18,142.95  $ 0  $18,142.95  57,510.61 
1/1/18  18,142.95  5,751.06  12,391.89  45,118.72 
1/1/19  18,142.95  4,511.87  13,631.08  31,487.64 
1/1/20  18,142.95  3,148.76  14,994.19  16,493.45 
1/1/21  18,142.95  1,649.50  16,493.45  0 
 $90,714.75  $15,061.19  $75,653.56 






Note: There is a rounding error of 15 cents in interest on liability on 1/1/21
This lease is a capital lease to the lessee because the lease term (five years)
exceeds 75% of the remaining economic life of the asset (five years). Also, the
present value of the minimum lease payments exceeds 90% of the fair value of
the asset.
Working Note:
Calculation of PV of minimum lease payments
Annual rental payment  $18,142.95 
PV of an annuity due of 1 for n = 5,i= 10%  x 4.16986 
PV of minimum lease payments  $75,653.56 
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