1 answer

Hughey Co. as lessee records a finance lease of machinery on January 1, 2021. The seven...

Question:

Hughey Co. as lessee records a finance lease of machinery on January 1, 2021. The seven annual lease payments of $875,000 are
Hughey Co. as lessee records a finance lease of machinery on January 1, 2021. The seven annual lease payments of $875,000 are made at the beginning of each year. The present value of the lease payments at 10% is $4,683,287. Hughey uses the effective-interest method of amortization. Instructions (Round to the nearest dollar.) (a) Prepare an amortization table for 2021 and 2022. (b) Prepare all of Hughey's journal entries for 2021.

Answers

Date Annual payments 10% Interest Reduction of liability Lease liability
1/1/2021 4683287
12/31/2021 875000 468329 406671 4276616
12/31/2022 875000 427662 447338 3829277
General Journal Debit Credit
Leased Machinery 4683287
Leased Liability 4683287
Interest Expense 468329
Lease Liability 406671
Cash 875000
.

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