Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $280,000 and lists a cash selling price of $350,248. Appropriate adjusting entries are made quarterly. (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.)

Related Information:
Lease term	5 years (20 quarterly periods)
Quarterly lease payments	$21,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter.
Economic life of asset	5 years
Interest rate charged by the lessor	8%

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.

Answer 1

Join 1 2018 2018 I TO cash Ale dr 117,512 Answer. (1) Journal Entry Eye Deal pate I particulary LE/ Debit (6) credit (&) Right of use Asset Alc dr 350, 248 TO Lease payment 350,248 Jani Lease payable 1 Ale dr| 21.000 121000 | Mar 31 Interest expense (350248–20000229, Alcar 16585 2018 I Lease payable 114415 - To cash 21000 Mar 31 Amortization expense (350,248/20) Akan 117,512 2018 1. To Right of use Assit (2) Insight machines I Date I particulary ILF Debit & credit (6) Jan I Lease Receivable 1 Ale dr I 350,248 2018 cost of goods sold 1 Al dr ! 28 9000 350,248 - To sales revenue 280,000 To equipment Jan 1 Ale ar 21000 2018 to lease receivable 21000 Mar 31 cash Aledr 21000 2018 TO Interest revenue (350,248-21000)*2%] To Lease Receivable 14415 cash 6585