On January 1, 2016, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers from ComputerWorld Corporation under a two-year operating lease agreement. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of six years with no residual value.
Required:
Prepare the appropriate entries for both (a) the lessee and (b) the lessor from the inception of the lease through the end of 2016. (Use straight-line depreciation.)
Answer:
(a) Nath-Langstrom Services, Inc. (Lessee)
Date Description Debit $ Credit $
June 30, 2016 Rent expense 10,000
Cash 10,000
( To record the rent expanses)
December 31, 2016 Rent expense 10,000
Cash 10,000
( To record the rent expanses)
b) ComputerWorld Corporation (Lessor)
June 30, 2016
Date Description Debit $ Credit $
June 30, 2016 Cash 10,000
Rent revenue 10,000
( To record the rent revenue)
December 31, 2016 Cash 10,000
Rent revenue 10,000
( To record the rent revenue)
Depreciation expense
=value ÷ life of the assets
=$90,000 ÷ 6 years
= 15,000
Accumulated depreciation 15,000
