**Lease Analysis for Educational Purposes****Context:**Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $101,000. The fiscal year for Manufacturers Southern ends on December 31.**Financial Information:**- **Lease Term:** 2 years (or 8 quarterly periods)- **Quarterly Rental Payments:** $18,000 at the beginning of each period- **Economic Life of Asset:** 2 years- **Fair Value of Asset:** $132,289- **Implicit Interest Rate:** 10%**Financial Tables for Reference:**- **FV of $1, PV of $1, FVAD of $1, and PVAD of $1** (Use appropriate factors from the tables provided to perform calculations)**Tasks Required:**1. **Payment Calculation:** - Determine how International Machines calculated the $18,000 quarterly lease payments.2. **Accounting Entries:** - Prepare appropriate entries for International Machines to record the lease at its inception on January 1, 2021, and for the second lease payment on April 1, 2021.**Instructions:**Complete these calculations and entries by filling out the sections provided for each task. (Note: Round your intermediate and final answers appropriately.)---This content aims to offer educational insights on financial lease operations, providing learners with a comprehensive understanding of lease calculations and accounting entries.

Time value of money: The time value is measured with the difference between an option's current…

1. Show how International Machines determined the $18,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.

1. Show how International Machines determined the $18,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

**Lease Analysis for Educational Purposes**

**Context:**
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $101,000. The fiscal year for Manufacturers Southern ends on December 31.

**Financial Information:**

- **Lease Term:** 2 years (or 8 quarterly periods)
- **Quarterly Rental Payments:** $18,000 at the beginning of each period
- **Economic Life of Asset:** 2 years
- **Fair Value of Asset:** $132,289
- **Implicit Interest Rate:** 10%

**Financial Tables for Reference:**
- **FV of $1, PV of $1, FVAD of $1, and PVAD of $1** (Use appropriate factors from the tables provided to perform calculations)

**Tasks Required:**

1. **Payment Calculation:**
- Determine how International Machines calculated the $18,000 quarterly lease payments.

2. **Accounting Entries:**
- Prepare appropriate entries for International Machines to record the lease at its inception on January 1, 2021, and for the second lease payment on April 1, 2021.

**Instructions:**
Complete these calculations and entries by filling out the sections provided for each task.

(Note: Round your intermediate and final answers appropriately.)

---

This content aims to offer educational insights on financial lease operations, providing learners with a comprehensive understanding of lease calculations and accounting entries.

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