Reference no: EM132464120
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 $119,292. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Related Information:
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Payment Date
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Lease
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|
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Effective
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Decrease In
Balance
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|
Balance
|
|
|
|
|
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01/01/2021
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15,700
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°
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0
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|
|
•
|
|
04/01/2021
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15,700
|
|
|
|
|
|
|
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07/01/2021
|
|
ir
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|
|
|
|
|
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10/01/2021
|
|
•
|
|
|
|
|
|
|
01/01/2022
|
|
|
|
|
|
|
|
|
04/01/2022
|
|
•
|
|
|
|
|
|
|
07/01/2022
|
|
|
|
|
|
|
|
|
10/01/2022
|
|
|
|
|
|
|
|
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Total
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$ 31,400
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$
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0
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$
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0
|
|
- Lease term2 years (8 quarterly periods)
- Quarterly rental payments$15,700 at the beginning of each period
- Economic life of asset 2 years
- Fair value of asset $119,292
- Implicit interest rate 6%(Also lessee's incremental borrowing rate)
Required:
Question 1: Make 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.
Please see the amortization schedule below. The journal entries are these:
1) Jan 1, 2021 Record the beginning of the else for Manufacturers Southern
2) Jan 1, 2021 Record the lease payment
3) April 1, 2021 Record lease payment
4) July 1, 2021 Record lease payment
5) Oct 1, 2021 Record lease payment
6) December 31, 2021 Record accrued Interest
7) December 31, 2021 Record amortization of the right-of-use asset for Manufactures Southern
8) Jan 1, 2022 Record lease payment