Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease
payments of $1,448, based on an interest rate of 6%, are to be made every December 31, beginning with December 31, 2017.
PV of Annuity of $1
Refer to the table above for present value factors.
1. Assume that the lease is treated as an operating lease.
a. Will the value of the forklift appear on Koffman's balance sheet?
b. What account will indicate that lease payments have been made?
2. Assume that the lease is treated as a capital lease or finance lease.
a. Identify and analyze the effect when the lease is signed.
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar.
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