Manufacturers Southern leased high-tech electronic equipment from Edison Leasing
ID: 2337565 • Letter: M
Question
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $117,772. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provided.) 7.14 points Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) 2 years (8 quarterly periods) $15,500 at the beginning of each period 2 years $117,772 6% eBook Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2019. Depreciation is recorded at the end of each fiscal year (December 31) on a straight-line basis. Print Complete this question by entering your answers in the tabs below References Amort Schedule General Journal Prepare a lease amortization schedule for the term of the lease for Manufacturers Southern. (Enter all amounts as positive values.) Decrease Lease Effective Interest ease Payment Date Payments Balance 01/01/2018 04/01/2018 07/01/2018 10/01/2018 01/01/2019 04/01/2019 07/01/2019 10/01/2019 Total Amort General Journal>Explanation / Answer
Manufacutrers Southern
Lease Amortisation Schedule
Implicit Interest Rates
6%
Fair value of Leased
$ 117,772
Date
Lease Payment
effective Interest
Decrease in Balance
Lease in Balance
01/01/2018
$ 15,500.00
$ -
$ 15,500
$ 102,272
01/04/2018
$ 15,500.00
$ 1,534
$ 13,966
$ 88,306
01/07/2018
$ 15,500.00
$ 1,325
$ 14,175
$ 74,131
01/10/2018
$ 15,500.00
$ 1,112
$ 14,388
$ 59,743
01/01/2019
$ 15,500.00
$ 896
$ 14,604
$ 45,139
01/04/2019
$ 15,500.00
$ 677
$ 14,823
$ 30,316
01/07/2019
$ 15,500.00
$ 455
$ 15,045
$ 15,271
01/10/2019
$ 15,500.00
$ 229
$ 15,271
$ (0)
Total
$ 124,000.00
$ 6,228
$ 117,772
$ 124,000
General Journal
Manufacutrers Southern
Date
General Journal
Debit
Credit
01/01/2018
Equippmen on Lease
$ 117,772
To, Edison Leasing
$ 117,772
(Being Equipment taken on lease recognised at fair value of assets and liability recorded)
01/01/2018
Edison Leasing A/c…Dr
$ 15,500
To, Bank A/c
$ 15,500
(Being Lease rental paid to Edison leasing at begining)
Finance charge on 1st rental is Nil
(No Entries to be made)
01/04/2018
Edison Leasing A/c…Dr
$ 13,966
Finance Charge on Lease Rental A/c..Dr
$ 1,534
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
01/07/2018
Edison Leasing A/c…Dr
$ 14,175
Finance Charge on Lease Rental A/c..Dr
$ 1,325
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
01/10/2018
Edison Leasing A/c…Dr
$ 14,388
Finance Charge on Lease Rental A/c..Dr
$ 1,112
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
31/12/2018
Depreciation on Equipment on Lease A/c..Dr
$ 58,886
To, Equipment on Lease A/c
$ 58,886
(Being depreciation on equipment on lease recognised as per SLM Basis)
31/12/2018
Statement of Profit or Loss A/c…Dr
$ 62,857
To, Finance Charge A/c
$ 3,971
To, Depreciation on Equipment on Lease A/c
$ 58,886
(Being Amount transferred to Statement of Profit or Loss A/c)
01/01/2019
Edison Leasing A/c…Dr
$ 14,604
Finance Charge on Lease Rental A/c..Dr
$ 896
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
01/04/2019
Edison Leasing A/c…Dr
$ 14,823
Finance Charge on Lease Rental A/c..Dr
$ 677
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
01/07/2019
Edison Leasing A/c…Dr
$ 15,045
Finance Charge on Lease Rental A/c..Dr
$ 455
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
01/10/2019
Edison Leasing A/c…Dr
$ 15,271
Finance Charge on Lease Rental A/c..Dr
$ 229
To, Bank A/c
$ 15,500
(Being Lease Rental Paid to Edison leasing )
31/12/2019
Depreciation on Equipment on Lease A/c..Dr
$ 58,886
To, Equipment on Lease A/c
$ 58,886
(Being depreciation on equipment on lease recognised as per SLM Basis)
31/12/2019
Statement of Profit or Loss A/c…Dr
$ 61,143
To, Finance Charge A/c
$ 2,257
To, Depreciation on Equipment on Lease A/c
$ 58,886
(Being Amount transferred to Statement of Profit or Loss A/c)
Manufacutrers Southern
Lease Amortisation Schedule
Implicit Interest Rates
6%
Fair value of Leased
$ 117,772
Date
Lease Payment
effective Interest
Decrease in Balance
Lease in Balance
01/01/2018
$ 15,500.00
$ -
$ 15,500
$ 102,272
01/04/2018
$ 15,500.00
$ 1,534
$ 13,966
$ 88,306
01/07/2018
$ 15,500.00
$ 1,325
$ 14,175
$ 74,131
01/10/2018
$ 15,500.00
$ 1,112
$ 14,388
$ 59,743
01/01/2019
$ 15,500.00
$ 896
$ 14,604
$ 45,139
01/04/2019
$ 15,500.00
$ 677
$ 14,823
$ 30,316
01/07/2019
$ 15,500.00
$ 455
$ 15,045
$ 15,271
01/10/2019
$ 15,500.00
$ 229
$ 15,271
$ (0)
Total
$ 124,000.00
$ 6,228
$ 117,772
$ 124,000
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