Question

Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments manufactured the chronometers at a cost of $340,000. The chronometers have a fair value of $442,000. 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.) Or Use Intermediate Accounting table if not provided.

Related Information:
Lease term		5 years (20 quarterly periods)
Quarterly lease payments	$	24,729 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	$	19,086
Interest rate charged by the lessor		12%

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.

Answer 1

Answer- Given Annual Interest Rate : 12% Quarterly Interest Rate = 12% = 3% (0%) 0.03 Member of paymen's - 20. preseul values of factor (pu) = (1-0)477e2 | +1 pu factor = -(170.035 (20-507 0.03 = -(1035192 0.07 1+1 pu. factor = 14.3238. +1 pu factor = 15.3238, Quarterly payments - $24,729 present value of Quastenla payments = $378,942 {$24729 x 15-3238] eredit Jan-1 1$378,942 $24,729 Journal entries Dale particulars - LF Debit 2021 Right to use Ale 1 or $378,942 To Lease payable Being beginning of lease] Lease payable Ale DX $ 24,729 To cash ieing Quarterly send paid? Hax-31 Interest expense lease ale $11368 13,361 Lease payable Ale To cash $ 378,942 *37.7 $11.3637 Being quarterly interest and veut paiet] Amorlizalion expense Ale or $18,947 To Right to usef$378,949/207 Being Amortization of Right to use equipment] $24789 $18947

DY (2) Journal entries in the books of Brookline instruments. Date particulars TLF Debit credit 2021 Lease Receivable Ale or $378,942 Jaull - To Right to use of asset | $378,942 eing beginning of lease] Her-i cash 1$24,729 ale $24,729 To Lease receivable Being Quarterly Lease seutal received Cash ale $24,729 To Lease Jeceivable | $13,361 To Interest revenue |$11,368 [$ 378,942 * 3/] being quasterly lease sent and interest received