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Exercise 15-7 (Algo) Sales-type lease with no selling profit; lessor [LO15-2] Edison Leasing leased high-tech electronic equi
Polit; lessor (LO15-2] Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edi
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Answer #1

1.) LEASE AMORTIZATION SCHEDULE

Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance
01/01/21 140,653
01/01/21 18,200 18,200 122,453
04/01/21 18,200 1,225 16,975 105,478
07/01/21 18,200 1,055 17,145 88,333
10/01/21 18,200 883 17,317 71,016
01/01/22 18,200 710 17,490 53,526
04/01/22 18,200 535 17,665 35,861
07/01/22 18,200 359 17,841 18,020
10/01/22 18,200 180 18,020 0
Total 145,600 4,947 140,653

Effective interest = Preceding outstanding balance x 1% [4% per year, 1% per quarter]

Decrease in Balance = Lease payments - Effective interest

Lease balance = Preceding lease balance - Decrease in balance

2.) JOURNAL ENTRIES:

Date Account Title and Explanation Debit $ Credit $
01/01/21 Lease receivable 140,653
Lease Equipment 140,653
(To record the lease)
01/01/21 Cash 18,200
Lease  receivable 18,200
(To record cash received)
04/01/21 Cash 18,200
Lease receivable 16,975
Interest revenue 1,225
(To record cash received)
07/01/21 Cash 18,200
Lease receivable 17,145
Interest revenue 1,055
(To record cash received)
10/01/21 Cash 18,200
Lease receivable 17,317
Interest revenue 883
(To record cash received)
12/31/21 Interest receivable 710
Interest revenue 710
(To record interest expense)
01/01/22 Cash 18,200
Lease receivable 17,490
Interest revenue 710
(To record cash received)

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