On July 1 2017 Shroff Company leased a warehouse building un

On July 1, 2017, Shroff Company leased a warehouse building under a 15-year lease agreement. The lease requires quarterly lease payments of $5,000. The first lease payment is due on September 30, 2017. The lease was reported as a capital lease using a 6% annual interest rate.

Required

a. Prepare a financial statement effects template to show the effects of recording the initial signing of the lase on July 1, 2017 and the necessary entries on September 30 and December 31, 2017.

Balance Sheet Transaction Cash Asset + Noncash Assets - Contra-Assets = Liabilities + Contrib. Capital + Earned Capital 7/1/17 Signed a capital lease $Answer + $Answer - $Answer = $Answer + $Answer + $Answer 9/30/17 Depreciation on leased asset Answer + Answer - Answer = Answer + Answer + Answer 9/30/17 Made quarterly lease payment Answer + Answer - Answer = Answer + Answer + Answer 12/31/17 Depreciation on leased asset Answer + Answer - Answer = Answer + Answer + Answer 12/31/17 Made quarterly lease payment Answer + Answer - Answer = Answer + Answer + Answer

Income Statement Revenue - Expenses = Net Income $Answer - $Answer = $Answer Answer - Answer = Answer Answer - Answer = Answer Answer - Answer = Answer Answer - Answer = Answe

Solution

BALANCE SHEET INCOME STATEMENT Transaction Cash Assets+ Non-cash Assets- Contra-assets = Liabilities+ Contributed Capital+ Earned Capital Revenue- Expenses= Net Income July,1, 2017- Signed A capital Lease 0 $196,900 0 $196,900 Sep,30,2017- Depn. On Leased asset ($196900/15*3/12) 0 0 ($3,282) 0 ($3,282) 0 $3,282 ($3,282) Sep,30,2017- Qrtrly. Leased Payment ($5,000) ($2,046.50) ($2,953.50) 0 $2,953.50 -2953.5 Dec 31,2017- Depn. On Leased asset ($3,282) ($3,282) 0 $3,282 ($3,282) Dec 31,2017- Qrtrly. Leased Payment ($5,000) -2077.2 -2922.8 0 $2,922.80 -2922.8 Total -10000 196900 -6564 192776.3 0 -12440.3 0 12440.3 -12440.3 ASSET/LIABILITY Total 180336 180336 Working Note:- Finding the PV of the lease with 5000 as PMt. At 6%/4=1.5% interest for 15*4=60 periods 5000X Cumm PVAF @1.5%for( 1-60 )= (39.380X5000)=196900