Question

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $139,107. (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 rental payments	$18,000 at the beginning of each period
Economic life of asset	2 years
Fair value of asset	$139,107
Implicit interest rate	4%
(Also lessee’s incremental borrowing rate)

Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31.

And

Prepare the appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to nearest whole dollar.)

Jan 1st 2018: Record the lease.

Jan 1st: 2018 Record cash received.

April 1st: Record cash received.

There should be 7 entries until Jan 1st 2019

Answer 1

Lease Term	2 years years (8 quarterly periods)
Quarterly lease payments	18000
Interest rate charged by the lessor	4%
	4/4 quarters = 1%

Payment Date	Lease Payments	Interest Expense	Decrease in Balance	Lease Balance
				139,107
1	18,000		18,000	121,107
2	18,000	1,211	16,789	104,318
3	18,000	1,043	16,957	87,361
4	18,000	874	17,126	70,235
5	18,000	702	17,298	52,937
6	18,000	529	17,471	35,467
7	18,000	355	17,645	17,821
8	18,000	179	17,821	0

Date	Genrela Journal	Debit	Credit
1/1/2018	Right-of-use equipment	139,107
	Lease payable		139,107
1/1/2018	Lease Payable	18000
	Cash		18000
1/4/2018	Interest Expense	1,211
	Lease Payable	16,789
	Cash		18,000
1/7/2018	Interest Expense	1,043
	Lease Payable	16,957
	Cash		18,000
1/10/2018	Interest Expense	874
	Lease Payable	17,126
	Cash		18,000
1/1/2019	Interest Expense	702
	Lease Payable	17,298
	Cash		18,000