1. Johnson Company has entered into a lease agreement for equipment which is not cancelable. The details of the lease are as follows: Inception of the lease: Jan 1 2012 residual value at the end of the lease term is guaranteed at the end of the lease term for $50000 annual lease payments are $124798 due at the beginning of each year starting on Jan 1 2012. The lease term is 6 years the economic life of the equipment is 5 years and the fair value of the asset at Jan 1 2012 is $600000. The borrowing rate is 6% per year. The lessee uses the straight line method to depreciate the asset.a. Prepare the journal entry to record the lease agreement on Jan 1 2012 from the lessee s perspective.b. Record the first payment on Jan 1 2012c. Record the second payment on Jan 1 2013 and any adjusting entries needed on Dec 31 2013.2. George Manufacturing manufactures equipment for booths and has leased one to Peterson for a period of 10 years. The equipment has an estimated useful life of 12 years and the normal selling price of the asset is $278072. The unguaranteed residual value is $20000. Peterson will make annual payments of $40000 at the beginning of each year starting on June 1 2012 and all maintenance and insurance costs. It cost George $180000 to manufacture the equipment and the borrowing rate is 10%.a. Record the lease agreement from the lessor s perspective on July 1 2013.b. Record receipt of the first payment on July 1 2013c. Record any adjusting entry at December 31 2013d. Record receipt of the second payment on July 1 2014 and any other entries if needed.3. On January 1 2011 Richardson Corp. leased a new machine from Johnson Corp for 3 years which has an expected useful life of 8 years with no salvage value. It is depreciated on a straight line basis. The annual rental payments are $180000 and start at the beginning of the year. Richardson is required to pay a security deposit of $35000 at the signing of the lease.a. Record the lease agreement from the lessee s point of view on Jan 1 2011.b. Record payment of the security deposit by Richardson and the first paymentc. Record the journal entry for initial lease contract from the lessor s perspective.d. Record the first payment received by the lessor and the security deposit.e. Record any adjusting journal entry needed at December 31 2011 by the lessee or lessor.
