Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the...

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Manufacturers Southern leased high-tech electronic equipmentfrom International Machines on January 1, 2018. InternationalMachines manufactured the equipment at a cost of $86,000.Manufacturers Southern's fiscal year ends December 31. (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 tablesprovided.)
RelatedInformation:
Lease term 2 years (8 quarterlyperiods)
Quarterly rental payments $15,000 at the beginning of eachperiod
Economic life of asset 2 years
Fair value of asset $113,973
Implicit interest rate 6%

Required:
1. Show how International Machines determined the$15,000 quarterly lease payments.
2. Prepare appropriate entries for InternationalMachines to record the lease at its beginning, January 1, 2018, andthe second lease payment on April 1, 2018.

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3.7 Ratings (469 Votes)

Solution International Machines Determination of quarterly lease payments Lease term n 2 x 4 quarters 8 periods Fair value of asset 113973 Equipment cost 86000 See Answer

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Manufacturers Southern leased high-tech electronic equipmentfrom International Machines on January 1, 2018. InternationalMachines manufactured the equipment at a cost of $86,000.Manufacturers Southern's fiscal year ends December 31. (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 tablesprovided.)RelatedInformation:Lease term2 years (8 quarterlyperiods)Quarterly rental payments$15,000 at the beginning of eachperiodEconomic life of asset2 yearsFair value of asset$113,973Implicit interest rate6%Required:1. Show how International Machines determined the$15,000 quarterly lease payments.2. Prepare appropriate entries for InternationalMachines to record the lease at its beginning, January 1, 2018, andthe second lease payment on April 1, 2018.


RelatedInformation:
Lease term	2 years (8 quarterlyperiods)
Quarterly rental payments	$15,000 at the beginning of eachperiod
Economic life of asset	2 years
Fair value of asset	$113,973
Implicit interest rate	6%