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 $121,469. (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	$16,800 at the beginning of each period
Economic life of asset	2 years
Fair value of asset	$121,469
Implicit interest rate	12%
(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.

Answer 1

Date	Lease Payments	Interest Revenue -12%	Principal Received	Lease Receivable Balance
1-Jan-18	-	-	-	121,469
1-Jan-18	16,800	-	16,800	104,669
1-Apr-18	16,800	3,140	13,660	91,009
1-Jul-18	16,800	2,730	14,070	76,939
1-Oct-18	16,800	2,308	14,492	62,448
1-Jan-19	16,800	1,873	14,927	47,521
1-Apr-19	16,800	1,426	15,374	32,147
1-Jul-19	16,800	964	15,836	16,311
10/1/201	16,800	489	16,311	0

Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1-Jan-18	Lease Receivable	121,469
	Inventory - Equipment		121,469
1-Jan-18	Cash	16,800
	Lease Receivable		16,800
1-Apr-18	Cash	16,800
	Lease Receivable		13,660
	Lease Revenue		3,140
1-Jul-18	Cash	16,800
	Lease Receivable		14,070
	Lease Revenue		2,730
1-Oct-18	Cash	16,800
	Lease Receivable		14,492
	Lease Revenue		2,308
1-Jan-19	Cash	16,800
	Lease Receivable		14,927
	Lease Revenue		1,873
1-Apr-19	Cash	16,800
	Lease Receivable		15,374
	Lease Revenue		1,426
1-Jul-19	Cash	16,800
	Lease Receivable		15,836
	Lease Revenue		964
10/1/201	Cash	16,800
	Lease Receivable		16,311
	Lease Revenue		489