Athabasca Inc leased a new piece of equipment during the past year.The lease was signed on January 1, 2014, and the first payment is due January 1, 2015.The lease payments are $825 per year, and the lease term is 15 years (of its 20 year useful life), after which they will return the equipment to the lessor, and the interest rate is 6%.The company is in the process of preparing their 2014 financial statements and has come to you for advice on how to record the lease.It is not recorded in the draft financial statements below. Athabasca Ine
Draft Balance Sheet
As at December 31, 2014
$\begin{array} { l r } \text { Current assets } & \$ 16,200 \ \text { Capital assets, net } & \underline { 20,900 } \
\text { Total assets } & \$ \underline { \underline { 37,100 } } \
& \ \text { Current liabilities } & \$ 18,400\
\text { Long-term liabilities } &\underline { 1,000 }\ & 19,400 \
\text { Shareholders' equity } & \underline { 17,700 } \
\text { Total liabilities and equity } &\$ \underline { \underline { 37,100 } } \ \end{array}$ Athabasca Inc
Draft Income Statement
For the year ending December 31, 2014
$\begin{array} { l r } \text { Revenue } & \$ 45,000 \ \text { Expenses } & 41,800 \ \text { Net Income } & 3,200 \end{array}$ Required:

Question

Athabasca Inc leased a new piece of equipment during the past year.The lease was signed on January 1, 2014, and the first payment is due January 1, 2015.The lease payments are $825 per year, and the lease term is 15 years (of its 20 year useful life), after which they will return the equipment to the lessor, and the interest rate is 6%.The company is in the process of preparing their 2014 financial statements and has come to you for advice on how to record the lease.It is not recorded in the draft financial statements below. Athabasca Ine
Draft Balance Sheet
As at December 31, 2014
$\begin{array} { l r } \text { Current assets } & \$ 16,200 \ \text { Capital assets, net } & \underline { 20,900 } \
 \text { Total assets } & \$ \underline { \underline { 37,100 } } \
 & \ \text { Current liabilities } &   \$ 18,400\
 \text { Long-term liabilities } &\underline { 1,000 }\ & 19,400 \
 \text { Shareholders' equity } & \underline { 17,700 }  \
 \text { Total liabilities and equity } &\$ \underline { \underline { 37,100 } } \ \end{array}$ Athabasca Inc
Draft Income Statement
For the year ending December 31, 2014
$\begin{array} { l r } \text { Revenue } & \$ 45,000 \ \text { Expenses } & 41,800 \ \text { Net Income } & 3,200 \end{array}$ Required:

Quizplus · Accepted Answer

The Answer of Athabasca Inc leased a new piece of equipment during the past year.The lease was signed on January 1, 2014, and the first payment is due January 1, 2015.The lease payments are $825 per year, and the lease term is 15 years (of its 20 year useful life), after which they will return the equipment to the lessor, and the interest rate is 6%.The company is in the process of preparing their 2014 financial statements and has come to you for advice on how to record the lease.It is not recorded in the draft financial statements below. Athabasca Ine
Draft Balance Sheet
As at December 31, 2014
$\begin{array} { l r } \text { Current assets } & \$ 16,200 \ \text { Capital assets, net } & \underline { 20,900 } \
 \text { Total assets } & \$ \underline { \underline { 37,100 } } \
 & \ \text { Current liabilities } &   \$ 18,400\
 \text { Long-term liabilities } &\underline { 1,000 }\ & 19,400 \
 \text { Shareholders' equity } & \underline { 17,700 }  \
 \text { Total liabilities and equity } &\$ \underline { \underline { 37,100 } } \ \end{array}$ Athabasca Inc
Draft Income Statement
For the year ending December 31, 2014
$\begin{array} { l r } \text { Revenue } & \$ 45,000 \ \text { Expenses } & 41,800 \ \text { Net Income } & 3,200 \end{array}$ Required:

Athabasca Inc Leased a New Piece of Equipment During the Past