Question

Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments manufactured the chronometers at a cost of $340,000. The chronometers have a fair value of $442,000. 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		5 years (20 quarterly periods)
Quarterly lease payments	$	24,729 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter.
Economic life of asset		6 years
Estimated residual value of chronometers at end of lease term	$	19,086
Interest rate charged by the lessor		12%

Required:
1. Prepare appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.

Answer 1

Page No ① Answer Acero piante entries for newston lates to record the arrangement | at its commencement on to 200 g man 31, 2001 On Jan 1, 2021 Presert. value of lease payments - Annual lease payment. X PVA O rate, period) = $24739 X PVAD (3%, 20) = 24799 x !-(1+3%) *** (1+34) 34. = 24499 X 15.3.2380 Pieks – 57) = $378942 On Mar 31, 2021 Interest expense = Present value of lease paymente – lease payment I made on Janl, 21 ) & interest rate]4 = (348942 – 24429) x 1 3 354213 * 34. * $ 10626

Page. No ® hecise payable = 24729 - 10626 - $14103 378942 - Amortization expense = Credit Jan! $ 378942 2021 $ 234429 Mar 31, 202) = $18947 she Date Particular Debit Right of use asset Lease payable $378942 | Jan', Lease payable 2021 : cash $24729 Interest expense $10626 Lease payable $14103 Cash $24729 Man 31, -Amortization expense , $ 18947 | Right of use asset $18947 Appropriate entries ferie brooklin e instruments to record the aurangement of its commencement Jan vad @ on May 2427 On Jan 1, 21 Lease seceivable =(04129 xProb{ 32,20) + (19086 X PV[31,20))

- (137) 224709x = 24109 x (1 porn187+ Begeino @ X(1137) 37, 19086 * cut 3x)20 = ( 24429 X 15.39380) + (19086 X 0.65368) 378942: 2502 + 10567.53648 = 389509.4867 ã 389510 cost of goods sold = cosf - Present value of residual vakie = 340,000 — (19086x Inte) = 340,000 - (19086X0.55368) = 340,000 - 10567.53648 = $ 329432 Interest revenue = ( 389510 -- 24429) x 12% 364781 X 3%. = $10.943 .24729 - 10943 Pease receivable $ 13786

Date ! Page. No 4 Debit . Gredit $389510 NO Jan ! 2001 $329432 $348942 $ 340,000 Particular Lease receivable cost of goods sold Sales revenue equipment Cash Lease ureceivable Cash lease creceivable Interest revenue $24729 2021 $24729 - $24829 Man 3 2021 $13786 $10943