Journal entries and amortization table for capital lease.
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Windom Co. as lessee records a capital lease of machinery on January 1, 2008. The seven annual lease payments of $350,000 are made at the end of each year. The present value of the lease payments at 10% is $1,704,000. Windom uses the effective-interest method of amortization and sum-of-the-years'-digits depreciation (no residual value).
Instructions (Round to the nearest dollar.)
(a) Prepare an amortization table for 2008 and 2009.
(b) Prepare all of Windom 's journal entries for 2008.
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Solution Summary
The solution explains how to prepare a amortization table for a capital lease using the example of Windon Co. and the related journal entries.
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Please see the attached file.
a) Date Annual Lease payment Interest Expense Reduction of Lease Obligation Lease Liability
1/1/2008 1,704,000
12/31/2008 350,000 170,400 179,600 1,524,400
12/31/2009 350,000 152,440 197,560 ...
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