Exercise 15-14 Presented below are two independent situations. 1. Flinthills Car Rental leased a car to Jayhawk Company for one year. Terms of the operating lease agreement call for monthly payments of $300. 2. On January 1, 2017, Throm Inc. entered into an agreement to lease 20 computers from Drummond Electronics. The terms of the lease agreement require three annual rental payments of $26,000 (including 11% interest) beginning December 31, 2017. The present value of the three rental payments is $63,536. Throm considers this a capital lease. Prepare the appropriate journal entry to be made by Jayhawk Company for the first lease payment.

Part 1

Dr Lease rentals $300 Expense

Cr     Cash Account $300

Part 2

Dr Leased Equipment $63,536

Cr Finance Lease Liability  $63,536

Explanation:

Part 1. Under the operating leases the lessee pays the monthly rentals which must be accounted for as an expense and the double entry is as under:

Dr Lease rentals $300 Expense

Cr     Cash Account $300

Part 2. Under the finance lease agreement, the lessee pays the value of the asset and the interest as well. So after the date of agreement when the asset is handed over the journal entry would be recording of the equipment received, which would written at its fair value or present value of the payments made. The journal entry would be:

Dr Leased Equipment $63,536

Cr Finance Lease Liability  $63,536

corrosion is a natural process, which converts a refined metal to a more chemically-stable form, such as its oxide, hydroxide, or sulfide. it is the gradual destruction of materials (usually metals) by chemical and/or electrochemical reaction with their environment.

explanation:

answer; the inspector may have found some violation that could cause death or some kind of serious injury;