JournaldrillFirst finance lease payment
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
Summit Freight's finance lease liability is $105,309.09 at January 1, with an implicit interest rate of 6%. On December 31 it makes the first annual payment of $25,000. Record the payment only; amortization of the right-of-use asset is recorded separately.
What this exercise teaches
Interest is $105,309.09 x 6% = $6,318.55 (rounded). The rest of the payment, $25,000 - $6,318.55 = $18,681.45, reduces the lease liability.
A hint if you get stuck
Part of the payment is interest on the opening liability and the rest reduces the liability.
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