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 $131,379. (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	$17,000 at the beginning of each period
Economic life of asset	2 years
Fair value of asset	$131,379
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.

"Amort Schedule and General Journal"

Answer 1

Amort schedule:

Payment	Lease receivable - opening	Interest revenue	Payment received	Lease receivable - ending balance
	a	b= a X 4% X 3/12	c	d= a+b-c
1	$ 131,379.00	$                       -	$ 17,000.00	$ 114,379.00
2	$ 114,379.00	$           1,143.79	$ 17,000.00	$    98,522.79
3	$    98,522.79	$              985.23	$ 17,000.00	$    82,508.02
4	$    82,508.02	$              825.08	$ 17,000.00	$    66,333.10
5	$    66,333.10	$              663.33	$ 17,000.00	$    49,996.43
6	$    49,996.43	$              499.96	$ 17,000.00	$    33,496.39
7	$    33,496.39	$              334.96	$ 17,000.00	$    16,831.36
8	$    16,831.36	$              168.31	$ 17,000.00	$            (0.33)

General Journal:

Date	Account	Debit	Credit
2018
Jan-01	Cash	17000
	Lease receivable	$      114,379.00
	Asset		$ 131,379.00
Apr-01	Cash	$        17,000.00
	Interest revenue		$      1,143.79
	Lease receivable		$    15,856.21
Jul-01	Cash	$        17,000.00
	Interest revenue		$         985.23
	Lease receivable		$    16,014.77
Oct-01	Cash	$        17,000.00
	Interest revenue		$         825.08
	Lease receivable		$    16,174.92
Dec-31	Interest receivable	$              663.33
	Interest revenue		$         663.33
2019
Jan-01	Cash	$        17,000.00
	Interest receivable		$         663.33
	Lease receivable		$    16,336.67