Eye Deal Optometry leased vision-testing equipment from Insight Machines on Janu

Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $400,000 and lists a cash selling price of $459,714. Appropriate adjusting entries are made quarterly. (FV of S1. PY of $1. FA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease termm Quarterly lease payments Economic life of asset Interest rate charged by the lessor 5 years (20 quarterly periods) S30,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 12% Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018. 2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018

Explanation / Answer

1).

Quarterly Payments = $30000

Quarterly Rate of Interest = 12%/4 = 3%

Period = 5 Year * 4 = 20 times

Present value of minimum lease payments = Quarterly Payments * PVA * (1.03)

= $30000 * 14.87747 * 1.03

= $459714

Journal Entry :- (In the Books of Eye Deal)

2). Journal Entry (in the Books of Insight Machines :-

Date Particulars Debit($) Credit($) Jan. 1, 2018 Leased Equipment A/c Dr. 459714 To Lease Liability 459714 Jan. 1, 2018 Lease Liability A/c Dr. 30000 To Cash 30000 Mar. 31, 2018 Lease Liability A/c Dr. 17109 Interest Expense A/c Dr. (($459714-$30000)*3%) 12891 To Cash 30000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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