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Prepare hughey journal entries

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Reference no: EM133132918

Question - Part I - Capital lease amortization and journal entries - Hughey Co. as lessee records a finance lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value).

Required -

(a) Prepare a amortization table for 2018 and 2019.

(b) Prepare Hughey's journal entries for 2018 and 2019.

Part II - Operating lease amortization and journal entries - Hughey Co. as lessee records an operating lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and straight line depreciation (no residual value).

Note: The data is the same as Part I, but consider it as an operating lease.

Required -

(a) Prepare a amortization table for 2018 and 2019.

(b) Prepare Hughey's journal entries for 2018 and 2019.

Reference no: EM133132918

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