Problem:
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2013. Edison purchased the equipment from International Machines at a cost of $276,187. Both the lessee and the lessor elected the short-term lease option. Appropriate adjusting entries are made annually.
Related Information:
- Lease term 1 years (4 quarterly periods)
- Quarterly lease payments $30,000 at Jan. 1, 2013, and at Mar. 31, June 30, Sept. 30.
- Economic life of asset 5 years
- Interest rate charged by the lessor 8%
Required:
Question 1: Prepare appropriate entries for Manufacturers Southern from the commencement of the lease through December 31, 2013.
Question 2: Prepare appropriate entries for Edison Leasing from the commencement of the lease through December 31, 2013.
Note: Please provide step by step solution.