"2-1-2010

"2-1-2010 - PROBLEM 21-7 (a) December 31, 2010...

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Unformatted text preview: PROBLEM 21-7 (a) December 31, 2010 Leased Equipment Under Capital Leases............................... 166,794 Lease Liability.................................................................. 166,794 (To record leased asset and related obligations at the present value of 5 future annual payments of $40,000 discounted at 10%, $40,000 x 4.16986) December 31, 2010 Lease Liability........................................................................... 40,000 Cash................................................................................. 40,000 (To record the first rental payment) (b) December 31, 2011 Depreciation Expense.............................................................. 23,828 Accumulated DepreciationCapital Leases.......................................................................... 23,828 (To record depreciation of the leased asset based upon a cost to Ludwick of $166,794 and a life of 7 years) December 31, 2011 Interest Expense...................................................................... 12,679 Lease Liability........................................................................... 27,321 Cash................................................................................. 40,000 (To record annual payment on lease obligation of which $12,679 represents interest at 10% on the unpaid principal of $126,794) 1 PROBLEM 21-7 (Continued) LUDWICK STEEL COMPANY (Lessee) Lease Amortization Schedule (Annuity Due Basis) Date Annual Lease Payment Interest (10%) on Liability Reduction of Lease Liability Lease Liability 12/31/10 $166,794 12/31/10 $40,000 $ $40,000 126,794 12/31/11 40,000 12,679 27,321 99,473 12/31/12 40,000 9,947 30,053 69,420 12/31/13 40,000 6,942 33,058 36,362 12/31/14 40,000 3,638* 36,362 *Rounding error of $2 (c) December 31, 2012...
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"2-1-2010 - PROBLEM 21-7 (a) December 31, 2010...

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