Edison Leasing leased high-tech electronic equipment to Manufacturers Southern o

Question

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $121,469. (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 Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31.

Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,800 at the beginning of each period Economic life of asset 2 years Fair value of asset $121,469 Implicit interest rate 12% (Also lessee’s incremental borrowing rate)

Explanation / Answer

Date Lease Payments Interest Revenue -12% Principal Received Lease Receivable Balance 1-Jan-18                   -                   -                     -            121,469 1-Jan-18          16,800                 -            16,800          104,669 1-Apr-18          16,800          3,140          13,660            91,009 1-Jul-18          16,800          2,730          14,070            76,939 1-Oct-18          16,800          2,308          14,492            62,448 1-Jan-19          16,800          1,873          14,927            47,521 1-Apr-19          16,800          1,426          15,374            32,147 1-Jul-19          16,800             964          15,836            16,311 10/1/201          16,800             489          16,311                       0 Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Jan-18 Lease Receivable          121,469 Inventory - Equipment          121,469 1-Jan-18 Cash            16,800    Lease Receivable            16,800 1-Apr-18 Cash            16,800    Lease Receivable            13,660    Lease Revenue              3,140 1-Jul-18 Cash            16,800    Lease Receivable            14,070    Lease Revenue              2,730 1-Oct-18 Cash            16,800    Lease Receivable            14,492    Lease Revenue              2,308 1-Jan-19 Cash            16,800    Lease Receivable            14,927    Lease Revenue              1,873 1-Apr-19 Cash            16,800    Lease Receivable            15,374    Lease Revenue              1,426 1-Jul-19 Cash            16,800    Lease Receivable            15,836    Lease Revenue                  964 10/1/201 Cash            16,800    Lease Receivable            16,311    Lease Revenue                  489

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