<u>Solution and Explanation:</u>
1) Journal Entry (Amounts in $)
Date Account Titles Debit Credit
Jan 1 Right of Use Asset 4,700,000
Lease Payable 4,700,000
(To record the lease liability at the beginning of lease)
2. )Amortization Schedule of Lease (Amounts in $)
Date Beginning Lease Payment Interest Expense Decrease Outstanding
Balance (A) (B = A*8%) (C = A*8%) in Balance Balance
12/31/18 4,700,000 1,419,028 376,000 1,043,028 3,656,972
12/31/19 3,656,972 1,419,028 292,558 1,126,470 2,530,502
12/31/20 2,530,502 1,419,028 202,440 1,216,588 1,313,914
12/31/21 1,313,914 1,419,028 105,114 1,313,914 0
3.) Date Account Titles and Explanations Debit Credit
Dec 31, 2018 Interest Expense 376,000
Lease Payable 1,043,028
Cash 1,419,028
(To record the lease payment and interest exp.)
Dec 31, 2018 Amortization Expense ($4,700,000/4 yrs) 1,175,000
Right of Use Asset 1,175,000
(To record amortization of right-of-use asset)
Dec 31, 2020 Interest Expense 202,440
Lease Payable 1,216,588
Cash 1,419,028
(To record the lease payment and interest exp.)
Dec 31, 2020 Amortization Expense ($4,700,000/4 yrs) 1,175,000
Right of Use Asset 1,175,000
(To record amprtization of right of use asset)
