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 $131,379. (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.) or Use Intermediate Accounting table if not provided.
Related Information: | |
Lease term | 2 years (8 quarterly periods) |
Quarterly rental payments | $17,000 at the beginning of each period |
Economic life of asset | 2 years |
Fair value of asset | $131,379 |
Implicit interest rate | 4% |
(Also lessee’s incremental borrowing rate) | |
Required:
Prepare a lease amortization schedule and appropriate entries for
Edison Leasing from the beginning of the lease through January 1,
2022. Edison’s fiscal year ends December 31.
Amortization schedule
Payment Date |
Lease Payments |
Effective Interest |
Decrease in Balance |
Lease Balance |
1/1/2021 |
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1/1/2021 |
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4/1/2021 |
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7/1/2021 |
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10/1/2022 |
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1/1/2022 |
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4/1/2022 |
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7/1/2022 |
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10/1/2022 |
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Total |
General Journal
1. Record the lease. (January 1,2021)
2. Record cash received. (January 1,2021)
3. Record cash received. (April 1, 2021)
4.Record cash received. (July 1, 2021)
5. Record cash received. (October 1, 2021)
6. Record interest receivable. (December 31, 2021)
7. Record cash received. (January 1, 2022)
Solution:
Payment Date | Lease payments | Effective interest | Decrease in balance | Lease balance |
1-Jan-21 | $131,379 | |||
1-Jan-21 | $17,000 | $0 | $17,000 | $114,379 |
1-Apr-21 | $17,000 | $1,144 | $15,856 | $98,523 |
1-Jul-21 | $17,000 | $985 | $16,015 | $82,508 |
1-Oct-21 | $17,000 | $825 | $16,175 | $66,333 |
1-Jan-22 | $17,000 | $663 | $16,337 | $49,996 |
1-Apr-22 | $17,000 | $500 | $16,500 | $33,496 |
1-Jul-22 | $17,000 | $335 | $16,665 | $16,831 |
1-Oct-22 | $17,000 | $168 | $16,832 | $0 |
Total | $136,000 | $4,621 |
Edison Leasing | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Lease receivables Dr | $131,379.00 | |
To Equipment | $113,515.00 | ||
(To record lease) | |||
1-Jan-21 | Cash Dr | $17,000.00 | |
To Lease receivables | $17,000.00 | ||
(To record cash received) | |||
1-Apr-21 | Cash Dr | $17,000.00 | |
To Lease receivables | $15,856.00 | ||
To Interest revenue | $1,144.00 | ||
(To record cash received) | |||
1-Jul-21 | Cash Dr | $17,000.00 | |
To Lease receivables | $16,015.00 | ||
To Interest revenue | $985.00 | ||
(To record cash received) | |||
1-Oct-21 | Cash Dr | $17,000.00 | |
To Lease receivables | $16,175.00 | ||
To Interest revenue | $825.00 | ||
(To record cash received) | |||
31-Dec-21 | Interest receivables Dr | $663.00 | |
To Interest revenue | $663.00 | ||
(To record interest revenue accured) | |||
1-Jan-22 | Cash Dr | $17,000.00 | |
To Lease receivables | $16,337.00 | ||
To Interest receivables | $663.00 | ||
(To record cash received) |
Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the...
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