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 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 10%. Note: Use tables for PV factor: (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. 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. Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole dollar. Year Lease Payments Lease Amortization Schedule Effective Interest Decrease in Balance Outstanding Balance 2024 400,000 2025 2026 2027 Total 0 400,000 < Req 1 Req 3 and 4 >
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 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 10%. Note: Use tables for PV factor: (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. 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. Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole dollar. Year Lease Payments Lease Amortization Schedule Effective Interest Decrease in Balance Outstanding Balance 2024 400,000 2025 2026 2027 Total 0 400,000 < 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, 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 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 10%.
Note: Use tables for PV factor: (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.
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.
Note: Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to the nearest whole
dollar.
Year
Lease
Payments
Lease Amortization Schedule
Effective
Interest
Decrease in
Balance
Outstanding
Balance
2024
400,000
2025
2026
2027
Total
0
400,000
< Req 1
Req 3 and 4 >
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