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Chapter%2015%20-%20In-Class%20Exercises - InClassExercises...

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In‐Class Exercises Chapter 15 ACCT 4050 Page 1 of 4 Chapter 15 In Class Exercises Exercise #1 On January 1, 2010, Ajax International (Lessor) leases equipment to Comet Limited (Lessee). The equipment has a market value of $150,000 and an estimated useful life of 10 years with no salvage value. The lease term is 7 years with annual payments of $22,815, plus $2,000 to cover executory costs (for a total payment of $24,815 beginning immediately. The lease is not cancellable. The implicit interest rate of the lease is 6%, of which Comet is fully aware. At the end of the lease period, Comet can exercise a bargain purchase option for $20,000. Required: 1) Prepare the schedule of lease payments. 2) Prepare the following journal entries for the lessee, Comet Limited: a) Recording the lease on January 1, 2010, including recording the first payment. b) Record lease amortization on December 31, 2010. c) Record the lease payment on December 31, 2010 and December 31, 2011. d) Record the exercise of the bargain purchase option on December 31, 2016.
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