Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2018. Edison purchased the equipment...

3.7 Ratings (489 Votes)

Solution - 1 Lease Aamotization Schedule
Date	Lease payment (A)	*Effective interest (B=(4/4)%D)**	Decraese in balance ( C)	Outstanding balance (D=A-C)
1/1/2018				$139,107
1/1/2018	$18,000	$0	$18,000	$121,107
4/1/2018	$18,000	$1,211	$16,789	$104,318
7/1/2018	$18,000	$1,043	$16,957	$87,361
10/1/2018	$18,000	$874	$17,126	$70,235
1/1/2019	$18,000	$702	$17,298	$52,937
4/1/2019	$18,000	$529	$17,471	$35,467
7/1/2019	$18,000	$355	$17,645	$17,821
10/1/2019	$18,000	$178	$17,822	-$1

Solution -2 Journal Entry
Date	Accounts Title & Explanaton	Debit	Credit
1/1/2018	Lease receivable	$139,107.00
	Inventory of equipment		$139,107.00
	*TO Record Lease*
1/1/2018	Cash	$18,000.00
	Lease receivable		$18,000.00
	*TO Record Firest Payment received*
4/1/2018	Cash	$18,000.00
	Lease receivable		$16,789.00
	Interest revenue		$1,211.00
	*TO Record Second Payment received*
7/1/2018	Cash	$18,000.00
	Lease receivable		$16,957.00
	Interest revenue		$1,043.00
	*TO Record Third Payment received*
10/1/2018	Cash	$18,000.00
	Lease receivable		$17,126.00
	Interest revenue		$874.00
	*TO Record Fourth Payment received*
12/31/2018	Interest receivable	$702.00
	Interest revenue		$702.00
	*To Record Interest Receivable*
1/1/2019	Cash	$18,000.00
	Lease receivable		$17,298.00
	Interest receivable		$702.00
	*TO Record lease Payment received*

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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)

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