American Food Services, Inc., leased a packaging machine from Barton and Barton

Question

American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $5 8 mililion (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no e Barton and Barton's implicit interest rate was 8%. Eyat, PyotSt BAoS. PVAofSL EVADotS1 and PVAD of SD (Use appropriate factoris) from the tables provided) 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1. 2018 2. Prepare an amortization schedule for the four-year term of the lease 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2018 and 2020 Complete this question by entering your answers in the tabs below. Req 1 Req 2Req 3 and 4 Prepare the journal entry for American Food Services at the beginning of the lease on January 1.2018. (If no entry is required for a particular transaction, select "No journal entry required in the first account field, Enter your answers in whole dollars and not in millions.) View transaction list Journal entry worksheet Record beginning of the lease for American Food Services. Note: Enter debits before oredts. January 01, 2018

Explanation / Answer

Date General Journal Debit Credit 01/01/2018 Right-of-use asset/Leased asset 5,800,000 Lease Payable 5,800,000 5800000/3.31213 1751138.995 PV of payments @8% 2 Date Payment Interest @8% Principal Balance 01/01/2018 5,800,000 12/31/2018 1751139 464000 1287139 4,512,861 12/31/2019 1751139 361029 1390110 3,122,751 12/31/2020 1751139 249820 1501319 1,621,432 12/31/2021 1751139 129707 1621432 0 3 12/31/2018 Interest expense 464000 Lease Payable 1287139 Cash 1751139 4 12/31/2020 Interest expense 249820 Lease Payable 1501319 Cash 1751139

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