Question

Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtney purchased the equipment from Doane Machines at a cost of $253,500, its fair value. (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.)

Related Information:
Lease term	2 years (8 quarterly periods)
Quarterly lease payments	$18,500 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter
Economic life of asset	5 years
Interest rate charged by the lessor	12%

Required:
Prepare a lease amortization schedule and appropriate entries for Baillie Power from the beginning of the lease through December 31, 2021. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter.
  

Prepare a lease amortization schedule. (Round your intermediate calculations and final answers to the nearest whole dollar. Enter all amounts as positive values.)

	Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance 01/01/2021 03/31/2021 06/30/2021 09/30/2021 12/31/2021 03/31/2022 06/30/2022 09/30/2022 Total

Answer 1

Date	Lease payments	Effective interest @ 3%	Decrease in balance	Lease balance
01-01-21				$      133,761
01-01-21	$             18,500	$                          -	$               18,500	$      115,261
3/31/21	$             18,500	$                    3,458	$               15,042	$      100,218
6/30/21	$             18,500	$                    3,007	$               15,493	$         84,725
9/30/21	$             18,500	$                    2,542	$               15,958	$         68,767
12-31-2021	$             18,500	$                    2,063	$               16,437	$         52,330
3/31/22	$             18,500	$                    1,570	$               16,930	$         35,400
6/30/22	$             18,500	$                    1,062	$               17,438	$         17,962
9/30/22	$             18,500	$                       539	$               17,961	$                  0
Total	$           148,000	$                 14,240	$            133,760

Date	Particulars	Debit $	Credit $
01-01-21	Right of use asset	$ 133,761
	Lease liability		$ 133,761
	[Lease of an equipment recorded]
01-01-21	Lease liability	$ 18500
	Cash		$ 18500
	[1st lease payment made]
3/31/21	Lease expense	$   18,500
	Lease liability		$     3,458
	Right of use asset		$   15,042
	[Lease expense recorded]
6/30/21	Lease liability	$ 18500
9/30/21	Cash		$ 18500
12-31-2021	[2nd lease payment made]
6/30/21	Lease expense	$   18,500
	Lease liability		$     3,007
	Right of use asset		$   15,493
	[Lease expense recorded]
6/30/21	Lease liability	$ 18500
	Cash		$ 18500
	[3rd lease payment made]
9/30/21	Lease expense	$   18,500
	Lease liability		$     2,542
	Right of use asset		$   15,958
	[Lease expense recorded]
	Lease liability	$ 18500
	Cash		$ 18500
	[4th lease payment made]
12-31-2021	Lease expense	$   18,500
	Lease liability		$     2,063
	Right of use asset		$   16,437
	[Lease expense recorded]

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