American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Bartor completed construction of the machine on January 1, 2018. The lease agreement for the $5.5 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 11%. (FV of $1, PV of $1. EVA of $1, PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018 2. Prepare an amortization schedule for the four-year term of the lease 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2018 and 2020 Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3 and 4 Prepare an amortization schedule for the four-year term of the lease. (Enter your answers in whole dollars and not in milli Round your answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Year Lease Payments Effective Interest Decrease in Balance Outstanding Balance 2018 2019 2020 2021 Total 〈 Req 1 Req 3 and 4
American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Bartor completed construction of the machine on January 1, 2018. The lease agreement for the $5.5 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 11%. (FV of $1, PV of $1. EVA of $1, PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018 2. Prepare an amortization schedule for the four-year term of the lease 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2018 and 2020 Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3 and 4 Prepare an amortization schedule for the four-year term of the lease. (Enter your answers in whole dollars and not in milli Round your answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Year Lease Payments Effective Interest Decrease in Balance Outstanding Balance 2018 2019 2020 2021 Total 〈 Req 1 Req 3 and 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Bartor
completed construction of the machine on January 1, 2018. The lease agreement for the $5.5 million (fair value and
present value of the lease payments) machine specified four equal payments at the end of each year. The useful life
of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was
11%. (FV of $1, PV of $1. EVA of $1, PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.)
Required:
1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018
2. Prepare an amortization schedule for the four-year term of the lease
3. & 4. Prepare the appropriate entries related to the lease on December 31, 2018 and 2020
Complete this question by entering your answers in the tabs below
Req 1
Req 2
Req 3 and 4
Prepare an amortization schedule for the four-year term of the lease. (Enter your answers in whole dollars and not in milli
Round your answers to nearest whole dollar. Enter all amounts as positive values.)
Lease Amortization Schedule
Year
Lease Payments Effective Interest Decrease in Balance Outstanding Balance
2018
2019
2020
2021
Total
〈 Req 1
Req 3 and 4
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