Capital lease amortization and journal entries
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments at 10% is $ 681,600. Title passes to Erica at the end of the lease.
Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation over the equipment's expected useful life of eight years, with no residual value.
Instructions (Round values to the nearest dollar.)
a) Prepare a lease amortization table for 2020 and 2021.
b) Prepare the general journal entries relating to this lease for 2020.

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The Answer of Capital lease amortization and journal entries
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments at 10% is $ 681,600. Title passes to Erica at the end of the lease.
Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation over the equipment's expected useful life of eight years, with no residual value.
Instructions (Round values to the nearest dollar.)
a) Prepare a lease amortization table for 2020 and 2021.
b) Prepare the general journal entries relating to this lease for 2020.

Capital Lease Amortization and Journal Entries