Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2021. Insight Machines manufactured the equipment at a cost of $380,000 and lists a cash selling price of $475,336. 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.) Related Information: Lease term Quarterly lease payments Economic life of asset Interest rate charged by the lessor 5 years (20 quarterly periods) $28,500 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter 5 years 8% Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. 2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. (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 answer to the nearest whole dollar.)

Answer 1

In the Books of Eye Deal
Date	Account Tittle	Debit	Credit
1-Jan	Right of use asset	$475,336.00
	Lease payabe		$475,336.00
1-Jan	Lease payabe	$28,500.00
	Cash		$28,500.00
31-Mar	Interest expense (475336-28500)*2%	$8,936.72
	Lease payabe	$19,563.28
	Cash		$28,500.00
31-Mar	Amortization expense (475336/20)	$23,766.80
	Right of use asset		$23,766.80
Insight Machines:
Date	Account Tittle	Debit	Credit
1-Jan	Lease receivable	$475,336.00
	Cost of goods sold	$380,000.00
	Sales revenue		$475,336.00
	Equipment		$380,000.00
1-Jan	Cash	$28,500.00
	Lease receivable		$28,500.00
31-Mar	Cash	$21,750.00
	Interest revenue (475336-28500)*2%		$8,936.72
	Lease receivable (BF)		$12,813.28