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Question: Braun Company signs a five-year capital

Braun Company signs a five-year capital lease with Verdi Company for office equipment. The annual year-end lease payment is $20,000, and the interest rate is 10%. Required 1. Compute the present value of Braun’s lease payments. 2. Prepare the journal entry to record Braun’s capital lease at its inception. 3. Complete a lease payment schedule for the five years of the lease with the following headings. Assume that the beginning balance of the lease liability (present value of lease payments) is $75,816.
Braun Company signs a five-year capital lease with Verdi Company for office equipment. The annual year-end lease payment is $20,000, and the interest rate is 10%.

Required
1. Compute the present value of Braun’s lease payments.
2. Prepare the journal entry to record Braun’s capital lease at its inception.
3. Complete a lease payment schedule for the five years of the lease with the following headings. Assume that the beginning balance of the lease liability (present value of lease payments) is $75,816. 


4. Use straight-line depreciation and prepare the journal entry to depreciate the leased asset at the end of year 1. Assume zero salvage value and a five-year life for the office equipment.

4. Use straight-line depreciation and prepare the journal entry to depreciate the leased asset at the end of year 1. Assume zero salvage value and a five-year life for the office equipment.





Transcribed Image Text:

Beginning Balance of Lease Ending Period Interest on Lease Reduction of Lease Cash Lease Balance of Lease Ending Date Liability Liability Liability Рayment Liability



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