Question

Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third Bank purchased the equipment at a cost of $1,950,000. Chance elected the short-term lease option. Appropriate adjusting entries are made annually. Related Information: Lease term 1 year (4 quarterly periods) Quarterly lease payments $78,000 on Jan. 1, 2018, and on Mar. 31, June 30, and Sept. 30. The economic life of asset 5 years Interest rate charged by the lessor 9% Required: Prepare appropriate entries for Chance from the beginning of the lease through December 31, 2018.

Answer 1

Answer:

Date	Account Title and Explanation	Debit ($)	Credit ($)
1/1/2018	No journal entry required
	(The lease is as short term lease so no entry is made at the beginning of the lease )
1/1/2018	Lease Expense	$ 78000
	Cash		$ 78000
	(To record lease payment )
31/3/2018	Lease Expense	$ 78000
	Cash		$ 78000
	(To record lease payment )
30/6/18	Lease Expense	$ 78000
	Cash		$ 78000
	(To record lease payment )
30/9/18	Lease Expense	$ 78000
	Cash		$ 78000
	(To record lease payment )