On May 1,2012,Janus Company Entered into a Five-Year Lease for Equipment.Annual

question 94

Essay

On May 1,2012,Janus Company entered into a five-year lease for equipment.Annual lease payments are $5,000,payable at the beginning of each lease year (May I).At the end of the lease,possession of the equipment will revert to the lessor.The equipment has an expected useful life of 10 years.Similar equipment could be purchased for $90,000 cash.Janus's incremental borrowing rate is 6%.The company has a April 30 year-end,and it uses straight-line depreciation for its property,plant,and equipment.
Requirements:
a.Prepare the journal entries relating to the lease and leased asset for Janus's fiscal year ending April 30,2013.
b.State the amounts related to the lease that would be reported on the April 30,2013 balance sheet,indicating the balance sheet classifications,account names,and amounts.

---

Definitions:

Modified AGI

Adjusted Gross Income adjusted by adding back certain deductions, often used to determine eligibility for various tax credits and retirement plans.

Qualified Adoption Expenses

Expenses that are necessary for and directly related to the legal adoption of an eligible child, which can include adoption fees, court costs, attorney fees, traveling expenses, and other expenses directly related to the adoption.

Child Tax Credit

A tax benefit in the United States designed to help families offset the cost of raising children by reducing their tax liability on a dollar-for-dollar basis.

AGI

An income calculation that includes all taxable income and is reduced by specific deductions, instrumental in determining tax obligations.