Question

Marin Corporation recorded a right-of-use asset for $214,400 as a result of a finance lease on December 31, 2019. Marin’s incremental borrowing rate is 11%, and the implicit rate of the lessor was not known at the commencement of the lease. Marin made the first lease payment of $37,534 on on December 31, 2019. The lease requires 8 annual payments. The equipment has a useful life of 8 years with no residual value.

Prepare Marin's December 31, 2017, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places e.g. 5,275)
Date Account Titles and Explanation Debit Credit
December 31, 2017
December 31, 2017 (To record amortization of the right-of-use asset)

Answer 1

Date Account titles and Explanation Debit Credit

31 Dec 19 Lease liability $18,079

Interest expense $19,455

[(214,400-37,534)*11%]

Cash $37,534

(To record interest expense)

31 Dec 19 Amortization expense $26,800

[214,400/8]

Right of use asset $26,800

(To record amortization of the right of use asset)