Question

Python Company leased equipment from Hope Leasing on January 1, 2018. Hope recently purchased the equipment at a cost of $271,910. Other information: Lease term 4 years Annual payments $77,000 on January 1 each year Life of asset 4 years Fair value of asset $271,910 Implicit interest rate 9% Incremental rate 9% There is no expected residual value. Required: Prepare appropriate journal entries for Python for 2018. Assume straight-line depreciation and a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)

Answer 1

January 1, 2018	Leased asset	271910
	Lease payable		271910
January 1, 2018	Lease payable	77000
	Cash		77000
December 31, 2018	Interest expense	17542		=(271910-77000)*9%
	Interest payable		17542
December 31, 2018	Depreciation expense	67978		=271910/4
	Accumulated depreciation		67978