Prepare the journal entry for Lancaster Services

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Question - Lancaster Services, Inc. leased equipment from Phillips Corporation. Phillips completed construction of the machine on January 1, 2018. The lease agreement for the $8 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Phillip's implicit interest rate was 10%.

Required -

1. Prepare the journal entry for Lancaster Services at the beginning of the lease on January 1, 2018.

2. Prepare a amortization schedule for the four-year term of the lease. Round your answers to the nearest whole dollar amounts.

3. Prepare the appropriate journal entries related to the lease on December 31, 2018.

4. Prepare the appropriate journal entries related to the lease on December 31, 2020.

Reference no: EM132526394

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