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 $60,000 penalty after two years if it fails to renew the lease. Framingham Leasing purchased the equipment from Waltham Machines at a cost of $400,283. (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 Lease renewal option for an additional Quarterly lease payments Economic life of asset Interest rate charged by the lessor 2 years (8 quarterly periods) 3 years (12 quarterly periods) $24,000 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 5 years 8% Required: Prepare appropriate entries for Natick 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.) View transaction list Journal entry worksheet < 1 2 3 4 Record the beginning of the lease for Natick Industries.

Answer 1

*4:20 DY Answert a) calculaton of Right of use Asset in Jan 1,2021:- Right of use Asset - $24,000 * praf (2%,20) = $24000 x [= (1+0.025 €170.02)] = $24000 x 16.67846 .. Right of use Assel = $ 400,283, Journal Entries Dale I particulars A Debit I credit 2021 | Right of use Asset Ale $400,283 To Lease payable | $400,283 | Lease payable Alc $ 24000 To cash | Mar31 Interest expense Ale $ 7,526 C$ 400,283-$ 24,000 Lease payable Ale or $16,474 Tocash $ 24,000 Amortisation ex penses Ale or $20014 To Right of use Asset |$20,014 {$400,283/20] Jan / Dy $ 24,000 DY