Eye Deal Optometry leased vision-testing equipment from Insight Machines on Janu
ID: 2553720 • Letter: E
Question
Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $360,000 and lists a cash selling price of $492,102. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.
a. Record the beginning of the lease for Eye Deal. (Jan 1)
b. Record the quarterly rental paid by Eye Deal. (Jan 1)
c. Record the quarterly rental and interest paid by Eye Deal. (March 31)
d. Record the Amortization of Right-of-use equipment for Eye Deal. (March 31)
2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.
a. Record the beginning of the lease for Insight Machines. (Jan 1)
b. Record the lease revenue received by Insight Machines. (Jan 1)
c. Record the lease revenue and interest received by Insight Machines. (March 31)
Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $27,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. Economic life of asset 5 years Interest rate charged by the lessor 4%Explanation / Answer
Journal Entry in the books of Eye Deal Date Account & Explanation Debit Credit Lease Amortization Schedule 01/01/2018 Right of Use-Vision Testing Equipment $492,102.00 Date Lease Rent Received /Payment Interest Income/Expense@4% Reduction of Lease Liability Receivable Lease Liability Receivable Lease Liability $492,102.00 01/01/2018 $492,102 Being Lease asset Recorded 01/01/2018 $27,000.0 $27,000.0 $465,102.0 01/04/2018 $27,000.0 $4,651.02 $22,349.0 $442,753.0 Lease Liability $27,000.00 01/07/2018 $27,000.0 $4,427.53 $22,572.5 $420,180.6 Cash $27,000.00 01/10/2018 $27,000.0 $4,201.81 $22,798.2 $397,382.4 Being Lease rent paid recorded 31/12/2018 $3,973.82 $397,382.4 01/01/2019 $17,000.0 $7,947.65 $9,052.4 $388,330.0 31/03/2018 Lease Liability $22,349.00 Interest Expense $4,651.02 Cash $27,000.00 Being Lease rent paid recorded 31/03/2018 Depreciation on Right of Use - Vision Testing Equipment $24,605.10 Accumulated Deprecition $24,605.10 Being Amortisation of Leased Asset( $492102/5/4) Journal Entry in the books of Insight Machine Date Account & Explanation Debit Credit 01/01/2018 Lease Receivable $492,102.00 Cost of Goods Sold $360,000.00 Sales $492,102.00 Inventory $360,000.00 To Record Sale and Lease Receivable 31/03/2018 Cash $27,000.00 Interest Income $4,651.02 Lease Receivable $22,349.00 Being Lease rent Received recorded
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