Question

Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,730,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. Evo 51. PV of S1, EVA of $1. PVA Of 51. EVAD of 51 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Lease Description: Quarterly lease payments $122,400-beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing 16 rate Fair value of asset $1,730,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Lessee Required 2 Lessor Required 3 How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? Mid-South Urologists Group Physicians' Leasing

Answer 1

Answer Page: No O present value of periodic Jease payments = 120400 x := (i+17) x(1448) = 123400 X 14:1339394 167.ua $1729994.182 [5x4-20yrs. a $1729994 Mid - South urologists group financial lease - lessee Physician's leasing sales type lease – lessoo I@ Teesmel emails Interest expense - 40%*(129994 - 122400) = $ 64303.46 $64 304 . Coach (lease payment) - #122400 kcase payable = 122400 – 6430 44 = $58096 .: Lease payable - $58096 O

Page. No Date Debit Coedit Jan !, 2021 Jan', 2021 Particular Cine va begiales groupe leveres Right of use asset lease payable 'hease payable Сах, Interest expense hease payable cash Physician's Leasing lease vreceivable equipment (lessor's cost) $1430,000 1430000 $ 1224001 - $102400 $ 64304 $58096 $122400 April, 2021 $1430,000 Jan', 2021 $1730,000 ... Cash Jan ' 2021 $1224001 - $102400 lease receivable Cash $122400 Aprili, 2001 *58096 $64384 lease receivable Interest revenue Tournal entries Machine cool = 1,5 million © VNN = $ 1500,000

Page No ③ Credit Rand Medical (lessor) Date Particular Lease ereceivable Present value Tan " cort of goods sold - sales revenue Equipment (lessorlycost) Jan, cash 2021 lease receivable Debit $1429994 $1500,000 $1,489994 $1500,000 $122400 +122400 $122400 Apsili, 2021 Cash lease receivable Interest revenue $58096 $64304