Leases on a Statement of Cash Flows—Lessee
Refer to Practice 15 6. Net income for the year was $10,000. Except for lease related items, there were no changes in current operating assets or liabilities during the year, no purchases or sales of property, plant, or equipment, and no dividends paid, stock issued, or loans obtained or repaid. Prepare a complete statement of cash flows using the indirect method of reporting operating cash flow assuming that the lease is accounted for as (1) an operating lease (net income was $10,000) and (2) a capital lease (net income was $9,621).
Practice 15 6
Journal Entries for an Operating Lease—Lessee
On January 1, the lessee company signed an operating lease contract. The lease contract calls for $3,000 payments at the end of each year for 10 years. The rate implicit in the lease is 10%. Make the journal entries necessary on the books of the lessee company (1) on the lease signing date and (2) to record the first lease payment.