2 Exercise 15-2 Finance lease; calculate lease payments (LO15-2) American Food S
ID: 2331408 • Letter: 2
Question
2 Exercise 15-2 Finance lease; calculate lease payments (LO15-2) American Food Services, Inc., Jleased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $5.8 milion (fair value and present value of the lease paymeets) 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. Barton and Barton's implicit interest rate was 8%/of St. Pyof$1. EVAofSt PVAoSt EVADofS1 and PVAD of SD (Use appropriate factors) from the tables provided.) 2325 Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018 2. Prepare an amortiration schedule for the four-year term of the lease 3.& 4. Prepare the appropriate entries related to the lease on December 31, 2018 and 2020 Commplete this question by entering your answers in the tabs below Req 1 Req 2 Reg 3 and4 Prepare the journal enbry for American Foed Services at the beginning of the lease on January 1, 20LB. (If no entry is required for a particuler transaction, select "No joumal entry required in the first account field. Enter your answers in whole Journal entry worksheet Record beginning of the lease for American Food Services 2 3Explanation / Answer
1.
Date
General Journal
Debit
Credit
Jan, 01, 2018
Right of Use asset
5800000
Lease Payable
5800000
2. Lease Ammortisation Schedule :-
Year
Lease Payments
Effective Interest
Derease in Balance
Outstanding Balance
5800000
2018
1751139
464000
1287139
4512861
2019
1751139
361029
1390110
3122751
2020
1751139
249820
1501319
1621432
2021
1751139
129707
1621432
0
Total
7004556
1204556
5800000
*5800000/3.31213** = $1751139
**I = 8%,
(3 & 4)
Date
General Journal
Debit
Credit
Dec, 31, 2018
Interest Exp
464000
Lease Payable
1287139
Cash
1751139
Dec, 31, 2018
Amortisation Exp
1450000
Right of Use asset
1450000
Dec, 31, 2020
Interest Exp
249820
Lease Payable
1501319
Cash
1751139
Dec, 31, 2020
Amortisation Exp
1450000
Right of Use asset
1450000
Date
General Journal
Debit
Credit
Jan, 01, 2018
Right of Use asset
5800000
Lease Payable
5800000
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