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Dec. " pene Lee Ly had Cash Dec. 1 Derecitn tpe Aum Depeciation merts x P tacter t paymerts tepene Feedback Check My Wo Recond he tueaetandhease l Sched eamoterepme December 31. Sa Company Scare: 23 Payments and erest Expene tpee Prepare jumal er Sa ehe year 200 Lae Payment Reduction of Lee Liiy Lity Ly a SIL

Dec. " pene Lee Ly had Cash Dec. 1 Derecitn tpe Aum Depeciation merts x P tacter t paymerts tepene Feedback Check My Wo Recond he tueaetandhease l Sched eamoterepme December 31. Sa Company Scare: 23 Payments and erest Expene tpee Prepare jumal er Sa ehe year 200 Lae Payment Reduction of Lee Liiy Lity Ly a SIL

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Instructions General Journal Shaded cells have feedback. X Chart of Accounts Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, 4a. Prepare journal entries for Sax for the year 2019. CHART OF ACCOUNTS provisions, and related events are as follows: Sax Company 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers General Journal Instructions General Ledger are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of $300,000, and a zero estimated residual value. ASSETS REVENUE How does grading work? 3. Sax agrees to pay all executory costs directly to a third party. 111 Cash 411 Sales Revenue PAGE 2019 4. The lease contains no renewal or bargain purchase options. 121 Accounts Receivable 5. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Sax's GENERAL JOURNAL Score: 70/88 141 Inventory EXPENSES incremental borrowing rate is 10%. DEBIT CREDIT DATE ACCOUNT TITLE POST. REF. 152 Prepaid Insurance 500 Cost of Goods Sold 6. Sax uses the straight-line method to record depreciation on similar equipment. Jan. 1 Equipment 300,000.00 1 181 Equipment 511 Insurance Expense Lease Liability 300,000.00 512 Utilities Expense 189 Accumulated Depreciation Dec. 31 Interest Expense 36,000.00 " 3 190 Right-of-Use Asset 513 Lease Expense Lease Liability 47,222.92 " 515 Amortization Expense 4 Analysis Shaded cells have feedback. X Cash 83,222.92 LIABILITIES 521 Salaries Expense Dec. 31 Depreciation Expense 60,000.00° 211 Accounts Payable 532 Bad Debt Expense 6 Feedback 231 Salaries Payable 540 Interest Expense Accumulated Depreciation 60,000.00 v Check My Work 253 Lease Liability 541 Depreciation Expense Present value (asset and liab) Lease payments x PV factor for 5 payments at 12% 261 Income Taxes Payable 559 Miscellaneous Expenses K Points: 13.52 / 17 910 Income Tax Expense EQUITY Feedback 311 Common Stock 3. Prepare a table summarizing the lease payments and interest expense. ▼ Check My Work 331 Retained Earnings Additional Instructions Record the right-of-use asset and the lease liability on January 1. Use the Summary of Lease Payments and Interest Expense Schedule to determine amounts for the payment and amortize the right-of-use asset using the straight-line method on December 31. Sax Company Score: 26/33 Summary of Lease Payments and Interest Expense Interest Expense 4b. Prepare journal entries for Sax for the year 2020. Lease Payment Reduction of Balance of Date at 12% on Required Lease Liability Liability Liability Balance How does grading work? 2 January 1, 2019 $300,000.00 * PAGE 2020 December 31, 2019 $83,222.92 * $36,999.00 $47,222.92 252,777.08 GENERAL JOURNAL Score: 51/63 4 December 31, 2020 83,222.92° 39,333.25 52,889.67 199,887.41 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 5 December 31, 2021 83,222.92 23,986.49 59,236.43 140,659.98 Dec. 31 Interest Expense 30,333.25 1 6 December 31, 2022 8,322.92 16,878.12 66,344.80 74,306.18 Lease Liability 52,889.67 2 7 December 31, 2023 83,222.92 8,916.74 74,306.18 0.00 3 Cash 83,222.92 Dec. 31 Depreciation Expense 60,000.00° 4 Accumulated Depreciation 60,000.00 Points: 16.55 / 21 Feedback Points: 9.71 / 12 v Check My Work The lease liability is reduced by the lease payments and increased by the accrued interest for the year. The balance should be reduced to zero at the end of the lease term.
Transcribed Image Text:Instructions General Journal Shaded cells have feedback. X Chart of Accounts Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, 4a. Prepare journal entries for Sax for the year 2019. CHART OF ACCOUNTS provisions, and related events are as follows: Sax Company 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers General Journal Instructions General Ledger are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of $300,000, and a zero estimated residual value. ASSETS REVENUE How does grading work? 3. Sax agrees to pay all executory costs directly to a third party. 111 Cash 411 Sales Revenue PAGE 2019 4. The lease contains no renewal or bargain purchase options. 121 Accounts Receivable 5. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Sax's GENERAL JOURNAL Score: 70/88 141 Inventory EXPENSES incremental borrowing rate is 10%. DEBIT CREDIT DATE ACCOUNT TITLE POST. REF. 152 Prepaid Insurance 500 Cost of Goods Sold 6. Sax uses the straight-line method to record depreciation on similar equipment. Jan. 1 Equipment 300,000.00 1 181 Equipment 511 Insurance Expense Lease Liability 300,000.00 512 Utilities Expense 189 Accumulated Depreciation Dec. 31 Interest Expense 36,000.00 " 3 190 Right-of-Use Asset 513 Lease Expense Lease Liability 47,222.92 " 515 Amortization Expense 4 Analysis Shaded cells have feedback. X Cash 83,222.92 LIABILITIES 521 Salaries Expense Dec. 31 Depreciation Expense 60,000.00° 211 Accounts Payable 532 Bad Debt Expense 6 Feedback 231 Salaries Payable 540 Interest Expense Accumulated Depreciation 60,000.00 v Check My Work 253 Lease Liability 541 Depreciation Expense Present value (asset and liab) Lease payments x PV factor for 5 payments at 12% 261 Income Taxes Payable 559 Miscellaneous Expenses K Points: 13.52 / 17 910 Income Tax Expense EQUITY Feedback 311 Common Stock 3. Prepare a table summarizing the lease payments and interest expense. ▼ Check My Work 331 Retained Earnings Additional Instructions Record the right-of-use asset and the lease liability on January 1. Use the Summary of Lease Payments and Interest Expense Schedule to determine amounts for the payment and amortize the right-of-use asset using the straight-line method on December 31. Sax Company Score: 26/33 Summary of Lease Payments and Interest Expense Interest Expense 4b. Prepare journal entries for Sax for the year 2020. Lease Payment Reduction of Balance of Date at 12% on Required Lease Liability Liability Liability Balance How does grading work? 2 January 1, 2019 $300,000.00 * PAGE 2020 December 31, 2019 $83,222.92 * $36,999.00 $47,222.92 252,777.08 GENERAL JOURNAL Score: 51/63 4 December 31, 2020 83,222.92° 39,333.25 52,889.67 199,887.41 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 5 December 31, 2021 83,222.92 23,986.49 59,236.43 140,659.98 Dec. 31 Interest Expense 30,333.25 1 6 December 31, 2022 8,322.92 16,878.12 66,344.80 74,306.18 Lease Liability 52,889.67 2 7 December 31, 2023 83,222.92 8,916.74 74,306.18 0.00 3 Cash 83,222.92 Dec. 31 Depreciation Expense 60,000.00° 4 Accumulated Depreciation 60,000.00 Points: 16.55 / 21 Feedback Points: 9.71 / 12 v Check My Work The lease liability is reduced by the lease payments and increased by the accrued interest for the year. The balance should be reduced to zero at the end of the lease term.
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