Manufacturers Southern leased high-tech electronic equipment from Edison Leasing

Question

Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $127,024. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2019. Depreciation is recorded at the end of each fiscal year (December 31) on a straight-line basis.

Journal entries should be:

a. Record the beginning of the lease for Manufacturers Southern.

b. Record lease payment. (Jan 1, 2018)

c. Record lease payment. (April 1, 2018)

d. Record lease payment. (July 1 2018)

e. Record lease payment. (Oct 1)

f. Reecord accrued interest. (Dec 31)

g. Record the amortization for right-of-use asset by Manufacturers Southern.

h. Record lease payment (Jan 1, 2019)

Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $17,000 at the beginning of each period Economic life of asset 2 years Fair value of asset $127,024 Implicit interest rate 8% (Also lessee’s incremental borrowing rate)

Explanation / Answer

Journal Entry in the books of Manufacture Southern Manufacture Southern Date Account & Explanation Debit Credit Lease Amortization Schedule 01/01/2018 Right of Use-Electroni Equipment $127,024.00 Date Lease Rent Received Payment Interest Expense@8% Reduction of Lease Liability Lease Liability Lease Liability $127,024.00 01/01/2018 $127,024 Being Lease asset Recorded 01/01/2018 $17,000.0 $17,000.0 $110,024.0 01/04/2018 $17,000.0 $2,200.48 $14,799.5 $95,224.5 Lease Liability $17,000.00 01/07/2018 $17,000.0 $1,904.49 $15,095.5 $80,129.0 Cash $17,000.00 01/10/2018 $17,000.0 $1,602.58 $15,397.4 $64,731.5 Being Lease rent paid recorded 31/12/2018 $1,294.63 $64,731.5 01/01/2019 $17,000.0 $1,294.63 $15,705.4 $49,026.2 01/04/2018 Lease Libility $14,799.50 Interest Expense $2,200.48 Cash $17,000.00 Being Lease Rent Paid Recorded 01/07/2018 Lease Libility $15,095.50 Interest Expense $1,904.49 Cash $17,000.00 Being Lease Rent Paid Recorded 01/10/2018 Lease Libility $15,397.40 Interest Expense $1,602.58 Cash $17,000.00 Being Lease Rent Paid Recorded 31/12/2018 Interest Expense $1,294.63 Interest Payable $1,294.63 Being Interest expence booked 01/01/2019 Lease Libility $15,705.40 Interest Payable $1,294.63 Cash $17,000.00 Being Lease Rent Paid Recorded

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.