Metlock Company leased equipme

Metlock Company leased equipment from Costner Company, beginningon December 31, 2019. The lease term is 5 years and requires equalrental payments of $75,477 at the beginning of each year of thelease, starting on the commencement date (December 31, 2019). Theequipment has a fair value at the commencement date of the lease of$320,000, an estimated useful life of 5 years, and no estimatedresidual value. The appropriate interest rate is 9%.Click here to view factor tables.Prepare Metlock’s 2019 and 2020 journal entries, assuming Metlockdepreciates similar equipment it owns on a straight-line basis.(Credit account titles are automatically indented whenthe amount is entered. Do not indent manually. For calculationpurposes, use 5 decimal places as displayed in the factor tableprovided and round final answers to 0 decimal places, e.g.5,275.)


Preparation of JournalEntries
Date Particulars Debit (in$) Credit (in$)
31/12/2019 Right of use Asset/Equipment $320,000
           Lease liability $320,000
(To record leaseliability)
31/12/2019 Lease liability $75,477
      Cash $75,477
(To record lease payment)
31/12/2020 Lease Liability


Interest Expense[($320,000 – $75,477) x 9%] $22,007
          Cash $75,477
(To record interestexpense)
31/12/2020 Amortisation expense($320,000 / 5 years) $64,000
           Accumulated amortisation – Right of use asset $64,000
(To record amortisation of the Rightof use asset )

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