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 $168,120. (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 $22,500 at the beginning of each period Economic life of asset 2 years Fair value of asset $168,120 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. Amort Schedule General Journal Prepare a lease amortization schedule for the term of the lease for Manufacturers Southern. (Round your intermediate calculations and final answers to the nearest whole dollar) Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance 01/01/2021 04/01/2021

Answer 1

Answer:

See Sheet1 of the attached excel file for the lease amortization schedule; and its Sheet2 for the journal entries.

Explanation:

Note: See Sheet1 of the attached excel file for the lease amortization schedule; and its Sheet2 for the journal entries.

In the lease amortization schedule, the following formula are used:

Number of quarters in a year = 4

Effective Interest = Previous Outstanding Balance * (Implicit interest rate / Number of quarters in a year)

Decrease in Balance = Lease Payments - Effective Interest

Outstanding Balance = Previous Outstanding Balance - Current Decrease in Balance