Lessor; amortization schedule; journal entries; Type A lease
Response to the following :
Refer to the situation described in problem 1.
Required:
Prepare a lease amortization schedule for the two-year term of the lease and appropriate entries for Edison Leasing from the beginning of the lease through December 31, 2016. December 31 is the fiscal year-end. Appropriate adjusting entries are recorded at the end of each quarter.
Problem 1:
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2016. Edison purchased the equipment from International Machines at a cost of $112,080.
Related Information:
Lease term 2 years (8 quarterly periods)
Quarterly lease payments $15,000 at Jan. 1, 2016, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter
Economic life of asset 2 years
Interest rate charged by the lessor 8%
Required:
Prepare a lease amortization schedule for the two-year term of the lease and appropriate entries for Manufacturers Southern from the beginning of the lease through December 31, 2016. The company's fiscal year-end is December 31. Appropriate adjusting entries are recorded at the end of each quarter.