Inception date:
May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017
$22,157.08
Bargain-purchase option price at end of lease term
$4,200
Lease term
5 years
Economic life of leased equipment
10 years
Lessor's cost
$68,000
Fair value of asset at May 1, 2017
$95,000
Lessor's implicit rate
10%
Lessee's incremental borrowing rate
10%
The collectibility of the lease payments is reasonably predictable, and there are no important
uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility
for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is
$12,000 ($0).
Prepare a tease amortization schedule for Riverbed Company for the 5-year lease term. (Round
present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2
decimal places, e.g. 15.25.)
RIVERBED COMPANY (Lessee)
Lease Amortization Schedule
Annual Lease Payment Plus Interest on
Reduction of Lease
Lease Liability
Date
BPD
Liability
Liability
$
$
5/1/17
5/1/17
5/1/18
5/1/19
5/1/20
5/1/21
4/30/22
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to
record the payments and expenses related to this lease for the years 2017 and 2018. Riverbed's
annual accounting period ends on December 31. Reversing entries are used by Riverbed. (Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.
Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round
answers to 2 decimal places, e.g. 15.25.)
Date
Account Titles and Explanation
Debit
Credit
5/1/18
(To record the lease)
(To record the first lease payment)
(To To record interest)
(To record depreciation)
(To record interest.)
(To record depreciation)
