Wing Corporation enters into a lease with Sharda Inc, a lessor, on August 15, 2011, that does not transfer ownership or contain a bargain purchase option. Both Wing and Sharda use IFRS. The lease covers three years of the equipment’s eight-year useful life, and the present value of the minimum lease payments is less than 90% of the equipment’s fair market value. Prepare Wing’s journal entry to record its August 15, 2011 annual lease payment of $31,500.
Wing has a November 30 year end.
August 15, 2011
Rent Expense ($31,500 ÷ 12 X 3.5)....... 9,188
Prepaid Rent ($31,500 ÷ 12 X 8.5)....... 22,312
Cash................................ 31,500
An alternate to the above:
August 15, 2011
Prepaid Rent ........................... 31,500
Cash................................ 31,500
November 30, 2011
Rent Expense ($31,500 ÷ 12 X 3.5)....... 9,188
Prepaid Rent ....................... 9,188
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