(a) -- Prepare a partial amortization table up to the October 1 payment.
Answer -
Date | Lease Payment ($) | Effective Interest ($) | Decrease in balance ($) | Outstanding balance ($) |
July 1 | - | - | - |
172000 [Given in question] |
July 1 |
4851 [Given in question] |
- | 4851 |
167149 [172000 - 4851] |
October 1 |
4851 [Given in question] |
3343 [(167149 * 8%) / 4] |
1508 [4851 - 3343] |
165641 [167149 - 1508] |
.
(b) -- What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1?
Answer -
Particulars | Explanation | Amount ($) |
Interest expense (Lessee) | Calculated in part - (a) | 3343 |
Interest revenue (Lessor) | Calculated in part - (a) | 3343 |
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