McCormick
Corporation Ltd., a public company following IFRS, recorded a finance lease at
$150,000 on May 1, 2011. The interest rate is 10%. McCormick Corporation made
the first lease payment of $25,561 on May 1, 2011.
The
lease requires a total of eight annual payments. The equipment has a useful
life of eight years with no residual value.
Prepare
McCormick Corporation’s December 31, 2011 adjusting entries.
Interest Expense........................ 8,296
Interest
Payable
[($150,000 – $25,561) X 10% X 8/12] 8,296
Depreciation Expense.................... 12,500
Accumulated
Depreciation
($150,000 X 1/8 X 8/12)...... 12,500
