Question

Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments manufactured the chronometers at a cost of $300,000. The chronometers have a fair value of $375,275. 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	$	21,821 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter.
Economic life of asset		6 years
Estimated residual value of chronometers at end of lease term	$	16,842
Interest rate charged by the lessor		8%

Required:
1. Prepare appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.

1.

No Debit Credit Date General Journal January 01, 2021 Right-of-use asset Lease payable January 01, 2021 Lease payable Cash March 31, 2021 Interest expense Lease payable Cash March 31, 2021 Amortization expense Right-of-use asset

2.

Help me on the homework please

Answer 1

Preparation of appropriate entries for Newton Labs and Brookline Instruments to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.

Refer the below images for more detailed solution with calculations.

Answer: calculation of present value of lease payments Lease payments $21821 X 16.67846*. present value $363944 Note: ** present value of an [i-at. (8 4 annuity due of lin=20, i = 24. because the contract calls for quarterly payments] . Requirement C . : prepare prepare appropriate aporopriate entries for Newton lobs. arrangement at its commencement, Jan 1 2021 and on to record the Mar 31, 2020: Answer: Date Debit credit Jan 1,2021 particulars Right of use asset Ale Dr To Lease payable Alc (pe. Calculated above) $363941 $363941 rease payable Ale or & 21821 To cash clease payment) $ 21821 $88424 May 31, 2021 Interest Lease expense ale pr payable (difference) All DV To cash chease payment) 114979 $21821 * 24• * [4363941-21821] = $6842 $18197 Amortization expense To Right of use ale or asset Alc $ 18197 $363941 + 20 poarters = $18197

Requirement : prepare an appropriate to record the arrangement on Mar 31, 20210 entries at its for Brookline commencement instruments Jan 1,2021 Date particulars credit Jan 1, 2021 Debit $375275 9 288666 Lease receivable Alc or cost of goods sold Alc or To sales revenue To Equipment (carrying Value) & 363941 300000 - wordings Lease receivable = ([$21821 x 16.67 846 ] + [ $ 16842 x0067297*]) = $363944 +11334 - $375275 * present value of linao, i=21. * 4 present value of an annsity due of flin=20, 1-21- cost of goods sold = ($300000 - $ 11334) = $288666 Residual asset calculated at the present value (n=2o, i= 20) - ) of the anticipated fair value at the end of the lease derm & $ 16842 x 0.67297 = f 11334 Sales Revenue = 9375275- $ 11334 = $36394

Note : Both (a) the present value of the & 363941 and (b) the present value are included in the lease receivable Combine to allow the lesson to recover lease payments of the residual value because the two amounts its $375275 net investment. Date Debit Credit Juni, 2021 particulars Cash Clease To lease payment) All or receivable 921821 $21821 Mar 31, 2021 $14752 cash (lease payment) Alc or $21821 To lease receivable (differences To interest revenue [2).x ($375275-821821) $7069