In: Accounting
On January 1, 2021, Nath-Langstrom Services, Inc., a computer
software training firm, leased several computers under a two-year
operating lease agreement from ComputerWorld Leasing, which
routinely finances equipment for other firms at an annual interest
rate of 6%. The contract calls for four rent payments of $14,000
each, payable semiannually on June 30 and December 31 each year.
The computers were acquired by ComputerWorld at a cost of $98,000
and were expected to have a useful life of seven years with no
residual value. Both firms record amortization and depreciation
semiannually. (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 journal entries recorded by
Nath-Langstrom Services for the first year of the lease.
2. Prepare appropriate journal entries recorded by
ComputerWorld Leasing for the first year of the lease.