a) 12/31/2018

Right-of-Use Assets $521.934

Lease Liability $521.934
Lease Liability 71,830
Cash 71,830

12/31/2019
Amortization Expense $52.193
Right-of-Use Assets $52.193
Lease Liability 35,822
Interest Expense 36,008
Cash 71,830

12/31/2020
Amortization Expense $521.934
Right-of-Use Assets $521.934
Lease Liability 38,687
Interest Expense 33,143
Cash 71,830

b) Lease Liability $521.934 c) Present Value of Rental Paym

Add : Legal Fees 5,000 Add : Present Value of Guara
Less : Incentive 1,000 Add : Present Value of Annua
Right-of-Use Assets $527.934 Lease Liability

d) Lease Liability $3.000

Gain on Lease $3.000
 Present Value of Rental Payment $520.544
Add: Present Value of Guaranteed Residual Value 1,390
Lease Payment 521,934
Fair Value of Building 525,176
Lease Liability $521.934

Date Annual Lease Interest Reduction Lease

Payment in Liability Liability
12/31/2018 $521.934
12/31/2018 $71.830 71,830 450,104
12/31/2019 71,830 36,008 35,822 414,282
12/31/2020 71,830 33,143 38,687 375,595

Present Value of Rental Payment $520.544

Add : Present Value of Guaranteed Residual 1,390
Add : Present Value of Annual Insurance Payment 36,234
Lease Liability $558.168
a) Lessee
Year Annual Lease Instalments
Year Of Discounting Paid in The Beginning of the year
1 0 $113.864
2 1 113,864
3 2 113,864
4 3 113,864
5 4 113,864
6 5 113,864
6 6 5,000

Repayment Schedule
Annual Reduction in
Year Payment Principal Amount
1/1/2019
1/1/2019 $113.864 $113.864
1/1/2020 113,864 77,242
1/1/2021 113,864 83,421
1/1/2022 113,864 90,095
1/1/2023 113,864 97,302
1/1/2024 113,864 105,087
12/31/2024 5,000 4,630
$688.184 $571.641

b) 1/1/2019 Lease Book

Right-of-Use Asset
Lease Liability
Lease Liability
Cash

12/31/2019
Interest Expense
Lease Liability

12/31/2019
Amortization Expense
Right-of-Use Asset

1/1/2020
Lease Liability
Interest Expense

Interest Expense
Lease Liability
 Cash

12/31/2020
Interest Expense
Lease Liability

12/31/2020
Amortization Expense
Right-of-Use Asset

Lease Incentive of $5.000

Right-of-Use Asset
Lease Liability
Cash

c) Lessee
Year Annual Lease Instalments
Year Of Discounting Paid in The Beginning of the year
1 0 $118.864
2 1 113,864
3 2 113,864
4 3 113,864
5 4 113,864
6 5 113,864
6 6

Repayment Schedule
Annual Reduction in
Year Payment Principal Amount
1/1/2019
1/1/2019 $118.864 $118.864
1/1/2020 118,864 77,494
1/1/2021 118,864 83,693
1/1/2022 118,864 90,389
1/1/2023 118,864 97,620
1/1/2024 118,864 105,430
$688.184 $573.490
 PV Present Value Value Recorded as Asset PV of Min
Factor on Min Lease Payment by Lease is lower than FMV/NPV Amortization Lease Payment
1 $113.864 $571.641 $95.273 $571.641
0.92593 105,430 95,273
0.85734 97,620 95,273
0.79383 90,389 95,273
0.73503 83,693 95,273
0.68058 77,494 95,273
0.63017 3,151
$571.641 $571.641

Finance Outstanding
Charges Liability
$571.641
457,777
36,622 380,535
30,443 297,114
23,769 207,019
16,562 109,716
8,777 4,630
370 0
$116.543

$571.641
$571.641
113,864
113,864

$36,622
$36.622

$95.273
$95.273

$36.622
$36.622

36,622
77,242
 113,864

$30.443
$30.443

$95.273
$95.273

$576.641
$571.641
$5.000

PV Present Value Value Recorded as Asset Right-of-Use

Factor on Min Lease Payment by Lease is lower than FMV/NPV Asset
1 $118.864 $573.490 $573.490
0.92593 105,430
0.85734 97,620
0.79383 90,389
0.73503 83,693
0.68058 77,494
0.63017
$573.490

Finance Outstanding
Charges Liability
$573.490
454,626
36,370 377,132
30,171 293,439
23,475 203,050
16,244 105,430
8,434 0
$114.694
a) The equipment leased shall be covered at $550,000. This implies that the asset is used and is
capitalized for $550,000 in Cage Company books. The entry will take place on 1 January 2017.
Debit of 550,000 dollars for the Right-to-Use Assets and $550,000 on credit in Lease Liability.
A 40% depreciation on the DDB basis would also be estimated at over $550,000.

Year Balance Lease Interest

Beginning of The Year Payment Expense
2019 $550.000 $120.987
2020 429,013 120,987 $21.451
2021 329,477 120,987 16,474
2022 224,963 120,987 11,248
2023 115,225 120,987 5,761

b) 1/1/2019
Right-of-Use Asset
Lease Liability

1/1/2019
Lease Liability
Cash

c) 12/31/2019
Interest Expense
Interest Payable
12/31/2019
Amortization expenses
Right-of-Use Asset

d) 1/1/2020
Interest Payable
Lease Liability
Cash

e) $429.013 ($550.000 - $120.987) is the amount that will shows up on December 31, 2019 Less
sheet which related to the lease contract

f) The lease liability will not be affected by fixed annual insurance on the least asset for $2.000
because lease liability includes cost of asset. Also, recording will be seperated from lease.

Date Balance Beginning Lease Interest

of The Year Payment Expenses
1/1/2019 $550.000 $120.987
1/1/2020 429,013 120,987 $21.451
1/1/2021 329,477 120,987 16,474
1/1/2022 224,963 120,987 11,248
1/1/2023 115,225 120,987 5,761
 00. This implies that the asset is used and is
The entry will take place on 1 January 2017.
ets and $550,000 on credit in Lease Liability.
be estimated at over $550,000.

Reduction of Interest Closing Balance

from Lease Payment End of The Year
$120.987 429,013
99,536 329,477
104,513 224,963
109,739 115,225
115,225 0

$550.000
$550.000

$120.987
$120.987

$21.451
$21.451

$220.000
$220.000

$21.451
99,536
$120.987

at will shows up on December 31, 2019 Lessee Balance

nual insurance on the least asset for $2.000

, recording will be seperated from lease.

Reduction of Interest Closing Balance of

from Lease Payment Lease Payable
$120.987 $429.013
99,536 329,447
104,513 224,963
109,739 115,225
115,226 0