Question

You are the new controller for Banana, Inc.. The company CFO has asked you to develop...

You are the new controller for Banana, Inc.. The company CFO has asked you to develop the appropriate worksheets and then journal entries to support several lease contracts as applied based on the new lease regulations. Your accounting group provided you the following information regarding the lease:

On January 2, 2019, Banana’s subsidiary, Cream, entered into an equipment lease for four years, with semi-annual payments, for a machine that had an eight (8) year life and a fair value of $420,000. The payments were $29,500 each starting January 2, 2019, and continuing each June 30 and December 31. The lessor’s implicit interest rate was 8%. Provide the amortization table for the lease and the journal entries required at the inception of the lease and the lease payment on June 30, 2020. The lessee records amortization expense each time a lease payment is made.

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Answer #1

1. Amortization schedule.

Lease Amortiztion Schedule

No/Yr

 Date Payment Interest Principal Balance
1:01 January 2,2019 $                             -   $                                  -   $                  -   $ (136,743.00)
1:01 January 2,2019 $             29,500.00 $                                  -   $   29,500.00 $ (107,243.00)
2:01 June 30,2019 $             29,500.00 $                   15,793.56 $   13,706.44 $   (93,536.56)
2019 Totals: December 31,2019 $             59,000.00 $                   15,793.56 $   43,206.44
3:02 January 2,2020 $             29,500.00 $                   15,406.67 $   14,093.33 $   (79,443.23)
4:02 June 30,2020 $             29,500.00 $                   14,588.61 $   14,911.39 $   (64,531.84)
2020 Totals: December 31,2020 $             59,000.00 $                   29,995.28 $   29,004.72
5:03 January 2,2021 $             29,500.00 $                   14,220.70 $   15,279.30 $   (49,252.54)
6:03 June 30,2021 $             29,500.00 $                   13,374.27 $   16,125.73 $   (33,126.81)
2021 Totals: December 31,2021 $             59,000.00 $                   27,594.97 $   31,405.03
7:04 January 2,2022 $             29,500.00 $                   12,936.58 $   16,563.42 $   (16,563.39)
8:04 June 30,2022 $             29,500.00 $                   12,936.58 $   16,563.42 $                     -  
2022 Totals: December 31,2022 $             59,000.00 $                   25,873.16 $   33,126.84

2. Journal entry at inception

Date Particulars Debit Credit
January 2,2019 Leased asset $           136,743.00
      Lease Payable $                 136,743.00

3. Journal entry for lease payment on June 30, 2020

Date Particulars Debit Credit
June 30,2020 Interest $             14,588.61
Lease Payble $             64,531.84
    Cash/Bank $                   79,120.45
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