Question

Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $127,024. (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 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 $127,024 Implicit interest rate 8% (Also lessee’s incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.

Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $127,024. (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 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 $127,024 Implicit interest rate 8% (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis. Complete this question by entering your answers in the tabs below.

Answer 1

Solution :- P.Noil Prepare a lease Amortization Schedule and appropriate entries for manufactures Southern from the beginning of the lease through Jan 1, 2020.. Amortiration ie recorded at the end of each fiscal year (Dec 31) on a straight line basis :- lease Amortization Schedule a liability Quaterly Interest Decrease in Balance in Date Ilease lease payments expense liability lease $ 187084 $ 17000 $ 17,000 Jan 1, 2021 110024 $2,200 $ 170,000 | Apr. 1, 2021 $ 14,800 $ 95,924 July 1, 2091 $ 170,000 $ 1,904 $15,096 $ 80,128 $ 170,000 $ 1,603 $15,397 $ 64,73| jan 1, 2012 $ 170,000 $1995 $ 15,705 $ 49,026 April, 2012 $170,000 $ 981 $ 16,019 $33007 July, 1,2022 $ 170,000 $ 660 $ 16,340 $ 16,667 Oct 1, 2012 $ 170,000 $ 333 $16,66 7 $136000 $ 8,976 $127024 Oct. I, 2021

Jan ) 1, 2021 Jan P.2 In the books of manufactures Sourther Journal entries Date Accant title and explanation / Debit Credit leased equipment $ 197,024 lease liability $127,024 to record the lease agreement) lease lability $ 17,000 Cash $ 17,000 to record lease payment) lease liability $ 14,800 Interest expense $ 2900 Cach $ 17000 To record the lear payment) lease leability $15,096 Interest expense $1,904 Cash $ 17,000 To record the leave payment) 1, 2021 April 1, 2021 July 1,202)

P.3 oct $15,397 1, 2021 $1,603 $17000 lease Grability Interest Expense Cach to record the lease payment) Amatization expense leased equipment To record Amortization exp) $63512 $63,512 31,2021 working notes : present value of lease Payment : Prerent value of lease payments lease x PvAF (in) payments $ 17,000 Quaterly lease payment Implicit interest rate (8) 3 months 12 months

P.u lease period (n) ♡ years xy 8 periods Present value of $ 17,000 * PvAF (@4., 8) lease payment $ 17,000 * 7.47199 $ 127,094 Since, present value of the lease payment is equal to fair value of leaked Asset. Therefore, If ů a finance leave for manufuturers Southern (lessee) essee should record Cease (abolety at lower of the present value of lease payment (or) fair value of the leased So, leare liability = $ 124,094 Asset

100 2 Ρ.ς & Interest Expense :- on Apr 1, 2001 - C$ 127024 - $ 17,000) x $ 2,200 July 1, 2021 ($ 197,024 - $17000 – $17000 x_2 $ 1,904 on Oct 1, 2021 ($ 127,024 - $17000 - $ 17000– $ 17000 $ 1,603 100 2 X 100 3) Amortization Amortization expense Exponse :- Cost - quasanteed residual value use feel life of Asset undey leased term $ 197,024 $ - Amatization Expert 2 years $ 63512