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E 15-2 Finance lease; calculate lease payments .LO15-2 American Food Services, Inc., 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%. 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. Prepare the appropriate entries related to the lease on December 31, 2024. 4. Prepare the appropriate entries related to the lease on December 31, 2026. (Note: You may wish to compare your solution to this exercise with that of E 14-20, which deals with a parallel situation in which the packaging machine was acquired with an installment note.)

E 15-2 Finance lease; calculate lease payments .LO15-2 American Food Services, Inc., 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%. 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. Prepare the appropriate entries related to the lease on December 31, 2024. 4. Prepare the appropriate entries related to the lease on December 31, 2026. (Note: You may wish to compare your solution to this exercise with that of E 14-20, which deals with a parallel situation in which the packaging machine was acquired with an installment note.)

FINANCIAL ACCOUNTING
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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E 15-2 Finance lease; calculate lease payments .LO15-2 American Food Services, Inc., 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%. 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. Prepare the appropriate entries related to the lease on December 31, 2024. 4. Prepare the appropriate entries related to the lease on December 31, 2026. (Note: You may wish to compare your solution to this exercise with that of E 14-20, which deals with a parallel situation in which the packaging machine was acquired with an installment note.)
Transcribed Image Text:E 15-2 Finance lease; calculate lease payments .LO15-2 American Food Services, Inc., 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%. 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. Prepare the appropriate entries related to the lease on December 31, 2024. 4. Prepare the appropriate entries related to the lease on December 31, 2026. (Note: You may wish to compare your solution to this exercise with that of E 14-20, which deals with a parallel situation in which the packaging machine was acquired with an installment note.)
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