Johnson Manufacturing Entered into a Noncancelable Lease for an Office

Johnson Manufacturing entered into a noncancelable lease for an office building on January 1, 2011. The lease calls for payments of $24,000 a year for eight years. The first payment is due on January 1, 2011, with the other payments due on December 31 of each year. Johnson has an incremental borrowing rate of 8 percent. The building is amortized by Johnson over eight years using the straight-line method and assuming no salvage value.
Prepare a partial balance sheet for Johnson for the year ending December 31, 2011, disclosing the asset and the liability related to the leased building.

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Asset:
Cost: $24,000 ´ 6.2064 = $148,954...

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