View the step-by-step solution to:

Question

I need to know if I calculated this amortization schedule as well as the current and long term portions of

liability properly.


Given information: "Six ovens were rented on December 31, with $20,000 charged to rent expense. The lease runs for 6 years with an implicit interest rate of 5%. At the end of the 6 years, Peyton will own them. Make any necessary adjusting entries." - The balance sheet being prepared is for 2017, the same year the lease was taken out.


For the fair value calculation I think I need to take the $20,000 payment and multiply it by the present value factor for an annuity due: 5.32948, which would give $106,589.60.

Annotation 2019-08-03 221020.png

Annotation 2019-08-03 221020.png

Fair Value of Rental Agreement
Payment $ 20,000.00
Implict Interest Rate
5%
PV factor of Annuity Due
5.32948
Fair Value $ 106,589.60
Lease Amortiztion Schedule
Effective Decrease in Outstanding
Year
Payments
Interest
Balance
Balance
0
$ 106,589.60
2017
$ 20,000.00
$ 20,000.00
$ 86,589.60
2018
2
$ 20,000.00
$4,329.48
$ 15,670.52
$ 70,919.08
2019
3
$ 20,000.00
$3,545.95
$ 16,454.05 $ 54,465.03
2020
4
$ 20,000.00
$2,723.25 $17,276.75 $ 37,188.29
2021
5
$ 20,000.00
$ 1,859.41
$ 18,140.59
$ 19,047.70
2022
6
$ 20,000.00 $ 952.38
$ 19,047.62
0.00
*Balance corrected for $0.08 rounding error
Current Liability as of 12/31/17 $ 15,670.52
Long-Term Liabili

Top Answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online