On April 1,2017,Janus Company Entered into a Five-Year Lease for Equipment.Annual

question 12

Essay

On April 1,2017,Janus Company entered into a five-year lease for equipment.Annual lease payments are $5,000,payable at the beginning of each lease year (April 1).At the end of the lease,possession of the equipment will revert to the lessor.The equipment has an expected useful life of 5 years.Similar equipment could be purchased for $50,000 cash.Janus's incremental borrowing rate is 6%.The company has a March 31 year-end,and it uses straight-line depreciation for its property,plant,and equipment.
Required:
a.Prepare the journal entries relating to the lease and leased asset for Janus's fiscal year ending March 31,2018.
b.State the amounts related to the lease that would be reported on the March 31,2018 balance sheet,indicating the balance sheet classifications,account names,and amounts.

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Definitions:

Adjusted Cash Balance

The cash balance reported in a company's financial statement, modified for factors like outstanding checks or deposits in transit.

Bank Statement

A monthly or quarterly document provided by a bank summarizing the transactions, including deposits and withdrawals, that occurred in a specific account.

Service Charge

A fee collected to pay for services related to the primary product or service being purchased.

Interest

The cost of borrowing money or the payment received for lending money, usually expressed as a percentage over a period of time.