Question
In: Accounting
On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cash selling price...
On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cash selling price for the equipment is $1,726,791. The lease agreement specifies six annual payments of $420,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year and (b) 3 percent. The CPI at the beginning of the lease is 150. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 12%. (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: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)
Solutions
Expert Solution
In the books of lessor, no entry required for
depreciation 
ekkarill92 answered 1 year agoRelated Solutions
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from Young Leasing Company. The terms of the lease require annual payments
of $50,000 for 10 years with the first payment being due on December 31, 2018.
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from Young Leasing Company. The terms of the lease require annual payments
of $50,000 for 10 years with the first payment being due on December 31, 2018.
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Payments
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0
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Related
Information:
Lease
term
2 years (8 quarterly periods)
Quarterly lease
payments
$7,500 at Jan 1, 2018 and at Mar 31,
June 30, Sept 30 and Dec 31 thereafter
Economic life of
asset
2 years (straight-line, zero residual value, quarterly)
The interest rate needs to be calculated with the...
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