Natick Industries leased high-tech instruments from Framingham Leasing on Januar

Question

Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2018. Natick has the option to renew the lease at the end of two years for an additional three years. Natick is subject to a $50,000 penalty after two years if it fails to renew the lease. Framingham Leasing purchased the equipment from Waltham Machines at a cost of $492,102.

Related Information: Lease term Lease renewal option for an additional Quarterly lease payments Economic life of asset Interest rate charged by the lessor 3 years (12 quarterly periods) 2 years (8 quarterly periods) $27,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, a 5 years 4%

Explanation / Answer

1. For Begaing of Lease

Waltham Machine Ac Dr $ 492102

To Lease Obligation $ 492102

2. Lease Payments

Lease Obligations ac Dr $ 27000

To Bank $ 27000

3. Interest and Lease

Lease interest ac dr $ 19684

To lease Obligations $ 19684

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