Use the information provided in BE20–18 about Lessee Corp. Assume that title to the property will not be transferred to Lessee by the end

Use the information provided in BE20–18 about Lessee Corp. Assume that title to the property will not be transferred to Lessee by the end of the lease term and that there is also no bargain purchase option, but that the lease does meet other criteria to qualify as a capital lease. Prepare the required entries made by Lessee Corp. on January 1, 2011, and at its year end of December 31, 2011.

January 1, 2011

Leased Building........................ 150,000.00

    Lease Obligation...................                  150,000.00

Lease Obligation.......................   14,146.14

Land Rental Expense....................     9,430.76

    Cash...............................                    23,576.90

[($23,576.90 X $150,000 / $250,000) = $14,146.14]

December 31, 2011:

Interest Expense........................  10,868.31

    Interest Payable

           [($150,000.00 – $14,146.14) X 8%]               10,868.31

Depreciation Expense - Building.........  7,500.00

    Accumulated Depreciation - Building

           ($150,000 / 20)..............          7,500.00