Question

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $124,782. (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 rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) 2 years (8 quarterly periods) $16,700 at the beginning of each period 2 years $124,782 8%

Answer 1

Answer:

Payment Date	Lease payments	Effective interest	Decrease in balance	Lease balance
1-Jan-21				$124782
1-Jan-21	$16700	$0	$16700	$108082
1-Apr-21	$16700	$2162	$14538	$93544
1-Jul-21	$16700	$1871	$14829	$78715
1-Oct-21	$16700	$1574	$15126	$63589
1-Jan-22	$16700	$1272	$15428	$48161
1-Apr-22	$16700	$963	$15737	$32424
1-Jul-22	$16700	$649	$16051	$16373
1-Oct-22	$16700	$327	$16373	$0
Total	$133600	$8818

Edision Leasing
Journal Entries
Date	Particulars	Debit	Credit
1-Jan-21	Equipment Dr	$124782
	To Lease Payable		$124782
	(To record lease)
1-Jan-21	Lease Payable Dr	$16700
	To Cash		$16700
	(To record lease payment)
1-Apr-21	Interest expense Dr	$2162
	Lease payable Dr	$14538
	To Cash		$16700
	(To record lease payment)
1-Jul-21	Interest expense Dr	$1871
	Lease payable Dr	$14829
	To Cash		$16700
	(To record lease payment)
1-Oct-21	Interest expense Dr	$1574
	Lease payable Dr	$15126
	To Cash		$16700
	(To record lease payment)
31-Dec-21	Depreciation expense Dr	$62391
	To Accumulated depreciation - Equipment		$62391
	(To record amortization)
31-Dec-21	Interest expense Dr	$1272
	To Interest payable		$1272
	(To record interest expense accured)
1-Jan-22	Interest payable Dr	$1272
	Lease payable Dr	$15428
	To Cash		$16700
	(To record lease payment)