You are Janet Wilt, CPA. The president of one of your clients, Boarshead Corporation, a small private company, emailed

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You are Janet Wilt, CPA. The president of one of your
clients, Boarshead Corporation, a small private company, emailed
you the following message on January 12, 2022:
Janet,
I was at a conference today and they were talking about the new
lease regulation and how that may impact our financial
statements. I know that we have a couple of leases, one that
we record as a liability and one that we do not. How will
this new lease requirement impact us? When does this go into
effect? Will we need to make adjustments to our 2021
financial statements for the new regulation? If so, what are
they and when do we need to record them? What do we need to
do to implement this change?
Don Collizi
President, Boarshead Corporation
Upon investigation of Boarshead’s records, you found that
Boarshead had had two leases. One that is currently being
accounted for as a capital lease and one being treated as an
operating lease (under the old standard).
The capital lease was for equipment. The lease started in 2019
and was a 5-year lease of annual lease payments of $50,000,
starting on January 1, 2019. The lease also had a bargain purchase
option for $20,000 at the end of the lease. The equipment had
a useful life of 6 years and Boarshead uses the straight-line
method of depreciation. The implicit interest rate for this
lease was 6%.
The operating lease was a 15-year lease for their facilities
that started on January 1, 2015. The lease consisted of
annual rental payments, starting on January 1, 2016 of
$60,000. When they started the lease in 2015, they expected
useful life of the facility was 30 years. Boarshead imputed
interest rate is 8%.
You also found that the January 1, 2022 payments for both leases
were made on December 28, 2021.
3. Assuming adoption in 2021, what journal entries
will need to be made in 2021 for the transition to the new lease
standard? (Assume that Boarshead used old accounting standards up
until end of 2021. Both payments that are due on January 1,
2022 were paid on December 28, 2021 and were recorded under the old
standard. What entries will need to be made on December 31, 2021 to
bring the records up to date and in compliance with ASU
2016-2.)