Prepare all the necessary entries for 3 years in the books of both parties.

WRITE YOUR FINAL ANSWERS BELOW

FIRST YEAR
Books of CPA Company (Seller-Lessee)
Cash 4,000,000
Right of use asset 1,634,500
Machinery 3,500,000
Lease liability 1,335,000
Gain on right transferred 799,500

Interest expense 80,100

Lease liability 419,900
Cash 500,000

Depreciation 544,833
Accumulated depreciation 544,833

Books of Buyer-Lessor
Machinery 4,000,000
Cash 4,000,000

Cash 500,000
Rent income 500,000

Depreciation 400,000
Accumulated depreciation 400,000

SECOND YEAR
Books of CPA Company (Seller-Lessee)
Interest expense 54,906
Lease liability 445,094
Cash 500,000

Depreciation 544,833
Accumulated depreciation 544,833

Books of Buyer-Lessor
Cash 500,000
Rent income 500,000

Depreciation 400,000
Accumulated depreciation 400,000

THIRD YEAR
Books of CPA Company (Seller-Lessee)
Interest expense 29,994
Lease liability 470,006
Cash 500,000

Depreciation 544,833
Accumulated depreciation 544,833

Accumulated depreciation 1,634,500

 Right of use asset 1,634,500

Books of Buyer-Lessor
Cash 500,000
Rent income 500,000

Depreciation 400,000
Accumulated depreciation 400,000
 WRITE YOUR FIN

RQ 1 DATE
2020

2021

2022

2023
RQ 2 2020

2021

2022

2023

RQ 3
WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BE

ABC COMPANY
DATE ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITL
1/1 Lease receivable 4,400,000 2020 1/1 Right of use asset
Machinery 3,760,100
Unearned interest income 639,900

Cash 1,000,000 Lease liability

Lease receivable 1,000,000

12/31 Unearned interest income 276,010 12/31 Interest expense

Interest income . 276,010

1/1 Cash 1,000,000 Depreciation

Lease receivable 1,000,000

12/31 Unearned interest income 203,611 2021 1/1 Lease receivable

Interest income 203,611 Accumulated depreciation
Loss on sublease
1/1 Cash 1,000,000
Lease receivable 1,000,000

12/31 Unearned interest income 123,972 Accrued interest payable

Interest income 123,972 Lease liability

1/1 Cash 1,000,000

Lease receivable 1,000,000 12/31 Interest expense

12/31 Unearned interest income 36,307

Accrued Interest income 36,307 Cash

Unearned interest income

2022 1/1 Accrued interest payable

Lease liability

12/31 Interest expense

Cash

Unearned interest income

2023 1/1 Accrued interest payable

Lease liability
 12/31 Interest expense

Cash

Unearned interest income

2024 1/1 Accrued interest payable

Lease liability

Interest income 276,010 2020 Interest expense

Net rental income, 2020 276,010 Depreciation
Net rental expense, 2020
Interest income 203,611
Net rental income, 2021 203,611 2021 Interest income
Interest expense
Interest income 123,972 Net rental expense, 2021
Net rental income, 2022 123,972
2022 Interest income
Interest income 36,307 Interest expense
Net rental income, 2023 36,307 Net rental expense, 2022

2023 Interest income

Interest expense
Net rental expense, 2023

YEAR 2020 YEAR

Balance Sheet Balance
Asset Asset
Current assets Noncurrent assets
Lease receivable 1,000,000 Right of use asset
Less: Accumulated depreciatio
Noncurrent assets Carrying amount, 2020
Lease receivable 3,400,000
Liabilities
Liabilities Current liabilities
Current liabilities
Unearned interest income 203,611
Noncurrent liabilities
Noncurrent liabilities
Unearned interest income 160,279

Income S
Income Statement Expenses
Revenues
Interest income 276,010
 YEAR 2021 YEAR
Balance Sheet Balance
Asset Asset
Current assets Current assets
Lease receivable 1,000,000

Noncurrent assets Noncurrent assets

Lease receivable 2,400,000

Liabilities Liabilities
Current liabilities Current liabilities
Unearned interest income 123,972

Noncurrent liabilities
Unearned interest income 36,307 Noncurrent liabilities

Income Statement
Revenues
Income S
Interest income 203,611
Revenues
YEAR 2022
Balance Sheet Expenses
Asset
Current assets
Lease receivable 1,000,000 YEAR

Balance
Noncurrent assets
Lease receivable 400,000 Asset
Current assets
Liabilities
Current liabilities
Unearned interest income 36,307 Liabilities
Current liabilities

Income Statement
Revenues
Interest income 123,972
Income S
YEAR 2023 Revenues

Balance Sheet
Asset Expenses
Current assets
Lease receivable 400,000
YEAR
Liabilities
Income S
Current liabilities Income S
Unearned interest income 36,307 Revenues

Income Statement Expenses

Revenues
Interest income 36,307
OUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW

XYZ COMPANY
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
Right of use asset 4,010,100 2020
Lease liability 3,760,100
Cash 250,000 2021 1/1 Right of use asset

Lease liability 1,000,000

Cash 1,000,000
12/31 Lease liability
Interest expense 276,010 Interest expense
Accrued interest payable 276,010

Depreciation 902,525 Depreciation

Accumulated depreciation 902,525

Lease receivable 3,300,000 2022 12/31 Lease liability

Accumulated depreciation 902,525 Interest expense
Loss on sublease 357,575
Right of use asset 4,010,100
Unearned interest income 550,000 Depreciation

Accrued interest payable 276,010

Lease liability 723,990 2023 12/31 Lease liability
Cash 1,000,000 Interest expense

Interest expense 203,611

Accrued interest payable 203,611 Depreciation

1,100,000
Lease receivable 1,100,000

Unearned interest income 275,000

Interest income 275,000

Accrued interest payable 203,611

Lease liability 796,389
Cash 1,000,000

Interest expense 123,972

Accrued interest payable 123,972

1,100,000
Lease receivable 1,100,000

Unearned interest income 192,500

Interest income 192,500

Accrued interest payable 123,972

Lease liability 876,028
Cash 1,000,000
Interest expense 36,307
Accrued interest payable 36,307

1,100,000
Lease receivable 1,100,000

Unearned interest income 101,750

Interest income 101,750

Accrued interest payable 36,307

Lease liability 363,693
Cash 400,000

Interest expense 276,010 2020

Depreciation 902,525
Net rental expense, 2020 1,178,535 2021 Interest expense
Depreciation
Interest income 275,000 Net rental expense, 2021
Interest expense 203,611
Net rental expense, 2021 71,389 2022 Interest expense
Depreciation
Interest income 192,500 Net rental expense, 2022
Interest expense 123,972
Net rental expense, 2022 68,528 2023 Interest expense
Depreciation
Interest income 101,750 Net rental expense, 2023
Interest expense 36,307
Net rental expense, 2023 65,443

YEAR 2020
Balance Sheet

Noncurrent assets
Right of use asset 4,010,100
Less: Accumulated depreciation 902,525
Carrying amount, 2020 3,107,575

Liabilities
Current liabilities
Lease liability 796,389

Noncurrent liabilities
Lease liability 1,239,721

Income Statement
Expenses
Depreciation expense 902,525
Interest expense 276,010
 YEAR 2021
Balance Sheet

Current assets
Lease receivable 1,100,000

Noncurrent assets
Lease receivable 1,100,000

Liabilities
Current liabilities
Unearned interest income 192,500
Lease liability 876,028

Noncurrent liabilities
Lease liability 363,693
Unearned interest income 101,750

Income Statement
Revenues
Interest income 275,000

Expenses
Interest expense 203,611

YEAR 2022

Balance Sheet

Current assets
Lease receivable 1,100,000

Liabilities
Current liabilities
Lease liability 363,693
Unearned interest income 101,750

Income Statement
Revenues
Interest income 192,500

Expenses
Interest expense 123,975

YEAR 2023
Income Statement
 Income Statement
Revenues
Interest income 101,750

Expenses
Interest expense 123,975
OUR FINAL ANSWERS BELOW

MNO COMPANY
ACCOUNT TITLE DEBIT CREDIT
No Entry

Right of use asset 3,000,000

Lease liability 2,750,000
Cash 250,000

Lease liability 825,000

Interest expense 275,000
Cash 1,100,000

Depreciation 1,000,000
Accumulated depreciation 1,000,000

Lease liability 907,500

Interest expense 192,500
Cash 1,100,000

Depreciation 1,000,000
Accumulated depreciation 1,000,000

Lease liability 998,250

Interest expense 101,750
Cash 1,100,000

Depreciation 1,000,000
Accumulated depreciation 1,000,000
Interest expense 275,000
Depreciation 1,000,000
Net rental expense, 2021 1,275,000

Interest expense 192,500

Depreciation 1,000,000
Net rental expense, 2022 1,192,500

Interest expense 101,750

Depreciation 1,000,000
Net rental expense, 2023 1,101,750
 3,760,100
2,020 1,000,000 1,000,000 2,760,100
2,020 1,000,000 276,010 723,990 2,036,110
2,021 1,000,000 203,611 796,389 1,239,721
2,022 1,000,000 123,972 876,028 363,693
2,023 400,000 36,307 363,693 -

2,750,000
2,021 1,100,000 275,000 825,000 1,925,000
2,022 1,100,000 192,500 907,500 1,017,500
2,023 1,100,000 101,750 998,250 19,250
569,250
2