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June 10, 2021
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June 10, 2021
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Write a memo | Accounting homework help

Write a memo to the “Toys R U Audit File.”  Be sure to include the following:
1.    Brief description of current reporting rules for leases
2.    Description of proposed reporting rules for leases
3.    Example of application of proposed rules for a lessee
a.    Assume the following lease terms:
                                              i.     Identifiable Asset:  Facility (building) lease
                                             ii.     Term 10 years – assume no renewal option
                                           iii.     Monthly lease payments beginning at $125,000 per month over the ten year lease term
                                           iv.     The risk free rate is 2%, Toys R U borrows at an incremental rate of 6%, and the lessor rate is unavailable
                                             v.     Assume the lease commences on January 1, 2021 and the first payment is due February 1, 2021
4.    Include the following journal entries:
a.    Recording of lease related asset and liability at lease inception – use “Capitalized Lease Asset” and “Capitalized Lease Liability” as account titles
b.    Recording of the monthly expense for the first two months – do each month separately
5.    Attach an Excel worksheet to your memo with the following:
                                              i.     Calculation of the amount of the capitalized lease asset and related lease liability
                                             ii.     An amortization schedule for the lease term

 

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