Question

Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2021. Natick has the option to renew the lease at the end of two years for an additional three years. Natick is subject to a $45,000 penalty after two years if it fails to renew the lease. Framingham Leasing purchased the equipment from Waltham Machines at a cost of $200,486. (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 Lease renewal option for an additional Quarterly lease payments Economic life of asset Interest rate charged by the lessor 2 years (8 quarterly periods) 3 years (12 quarterly periods) $11,000 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 5 years 4% Required: Prepare appropriate entries for Natick Industries from the beginning of the lease through March 31, 2021. Appropriate adjusting entries are made quarterly. (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 answers to the nearest whole dollar.) View transaction list Journal entry worksheet 1 2 3 4 Record the beginning of the lease for Natick Industries. Note: Enter debits before credits.

Answer 1

Journa Entry- Lease-Natick Industries
Date	Account titles and explanation	Debit	Credit
1-Jan-21	Right- of-use asset ($11,000 * PVAF@1%for 0-20) ($11000*18.2260	$200,486
	Lease payable		$200,486
	TO Record Lease at Inception
1-Jan-21	Lease payable	$11,000
	Cash		$11,000
	TO Record First Lease Payment made
31-Mar-21	Interest expense (200486 - 11000 )*1%	$1,895
	Lease payable (Bf)	$9,105
	Cash		$11,000
	TO Record Second Lease Payment made
31-Mar-21	Amortization expense (200486/ 20)	$10,024
	Right-of-use asset		$10,024
	To Record Amortisation Expense