Question

Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $112,446. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $.1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) 2 years (8 quarterly periods) $15, 300 at the beginning of each period 2 years $112, 446 Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2019. Depreciation 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. Amort General Schedule Journal Prepare a lease amortization schedule for the term of the lease for Manufacturers Southern. (Enter all amounts as positive values.) Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance 01/01/2018

Answer 1

Part 1

Payment date	Lease payments	Effective interest	Decrease in balance	Lease balance
01/01/2018				112446
01/01/2018	15300		15300	97146
04/01/2018	15300	2429	12871	84275
07/01/2018	15300	2107	13193	71082
10/01/2018	15300	1777	13523	57559
01/01/2019	15300	1439	13861	43698
04/01/2019	15300	1092	14208	29490
07/01/2019	15300	737	14563	14927
10/01/2019	15300	373	14927	0
Total	122400	9954	112446

Effective interest = previous lease balance *2.5%

Decrease in lease balance = lease payments – effective interest

Lease balance = previous lease balance – decrease in balance

Part 2

No.	Date	General journal	Debit	Credit
1	January 01, 2018	Right-of-use asset	112446
		Lease liability		112446
2	January 01, 2018	Lease liability	15300
		Cash		15300
3	April 01, 2018	Interest expense	2429
		Lease liability	12871
		Cash		15300
4	July 01, 2018	Interest expense	2107
		Lease liability	13193
		Cash		15300
5	October 01, 2018	Interest expense	1777
		Lease liability	13523
		Cash		15300
6	December 31, 2018	Interest expense	1439
		Lease liability		1439
7	December 31, 2018	Depreciation expense	56223
		Accumulated depreciation (112446/2)		56223
8	January 01, 2019	Lease liability	15300
		Cash		15300