American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. The lease agreement for the $4.4 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 four years with no residual value. Barton and Barton's implicit interest rate was 11%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2024. 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, 2024 and 2026. Req 1 Year Reg 2 Prepare an amortization schedule for the four-year term of the lease. Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole dollar. 2024 2025 2026 2027 Total Lease Payments 1,388,070 X Req 3 and 4 1,388,070 Lease Amortization Schedule Decrease in Balance Effective Interest 484,000 484,000 0 Outstanding Balance 4,400,000
American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. The lease agreement for the $4.4 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 four years with no residual value. Barton and Barton's implicit interest rate was 11%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2024. 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, 2024 and 2026. Req 1 Year Reg 2 Prepare an amortization schedule for the four-year term of the lease. Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole dollar. 2024 2025 2026 2027 Total Lease Payments 1,388,070 X Req 3 and 4 1,388,070 Lease Amortization Schedule Decrease in Balance Effective Interest 484,000 484,000 0 Outstanding Balance 4,400,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Tt.15.
Transcribed Image Text:American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and
Barton completed construction of the machine on January 1, 2024. The lease agreement for the $4.4 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 four years with no residual value. Barton and Barton's implicit interest rate was 11%.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2024.
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, 2024 and 2026.
Req 1
Year
Reg 2
Prepare an amortization schedule for the four-year term of the lease.
Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole
dollar.
2024
2025
2026
2027
Total
Lease
Payments
1,388,070 X
Req 3 and 4
1,388,070
Lease Amortization Schedule
Decrease in
Balance
Effective
Interest
484,000
484,000
< Req 1
0
Outstanding
Balance
4,400,000
Req 3 and 4 >
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Step 1: Define lease payment
VIEWStep 2: 1) Preparation of journal entry for beginning of lease is as follows-
VIEWStep 3: 2) The presentation of the amortization schedule for four year term is as follows-
VIEWStep 4: 3 and 4 ) Preparation of journal entries for Dec. 31, 2024, and Dec. 31, 2026"
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