Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $270,000 and lists a cash selling price of $369,077. 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) $20,250 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 5 years 4% Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018. 2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.

Answer 1

Answer Page: No Jan ! 2018 O Apexopeiate entries for Eye Deal to record the amangement and its beginning Jan Lele on Mangel aula Date Particular Debit Gredit Jan' Right of use arsel $369,077 2018 lease payable $369,077 (sto record lease payable) Lease payable $ 20,250 cash $ 20,250 (to record lease payment Mar 31 Lease payable $16,762 2018 Interest expense $3488 Cash $ 20,250 Mar 31, Amortization expense 1 $18,454 2018 $18,454 (to record amortization expense) Interest expense (369014 – 20050) X1% (44=17 $ 3488 Right of use asset Lease payable 20250 - 3488 $ 16,762 Amortization expense 369,071 - $18454 20

2 Mar 2018 Jan! 2018 Page: No@ te propriate entries for insight machines to record the arrangement and its beginning van l, vole Eon Man 3 pate Particular Debit Credit lease oreceivable $369,077 cost of goods sold $ 270,000 sales revenue $369,077 Equipment $270,000 (To record sales) Cash $20,250 lease receivable 2018 $ 20,250 (to record lease receipt cash $20,250 3018 Interest revenue (369011-2020W/ $3488 lease receivable $16,762 (To record interest & leare receivable) Jan! Mar 31