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

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.

Correct Answer:

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a.First compute the value of the lease u...

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