Question

Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2021. Natick has the option to renew the lease at the end of two years for an additional three years. Natick is subject to a $50,000 penalty after two years if it fails to renew the lease. Leasing purchased the equipment from Waltham Machines at a cost of $200.142. V 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 ter Las renewal option for an additional Quarterly lease payments Economie life of asset Interest rate charged by the lessor 2 years ( quarterly perioda) year 12 quarterly periods) $12,000 at Jan 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 5 years Required: Prepare appropriate entries for Notick Industries from the beginning of the lease through March 31, 2021. Appropriate adjusting entries are made quarterly. (if no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate calculations and final answers to the nearest whole dollar.)

Answer 1

solution Date I Debit Gredet 1 Jan 21 | P18712 Account titles & explanation Right of use asset [12000 x PVAF @170-20] [ 12000 x 18-2260] Lease payable [to record Lease at Inception] 218712 [ Jan al 12000 12000 31 Mar 21 2067 9933 Laye Paul cash [ To record First Lease payment made] Interest expense [ 218712 - 12000]X1% Lease payable (Bf) cash [ To recad second lease payment made] Amortization expense ( 218712/20] Reight of use asset [ To record Amortization expense] 12000 31 mar 21 10936 10936