Interest at 10% on Previous Balance Reduction of Principal Balance Date Payment Principal $ 8,096 8,096 $ 8,096 5,406 $35,000 26,904 21,498 1/1/15 1/1/16 1/1/17 1/1/18 1/1/19 12/31/19 $2,690 8,096 2,150 1,555 901 5,946 6,541 7,195 1,816 15,552 8,096 8,096 2,000 9,011 1,816 184* Totals $42,480 $7,480 $35,000 *Adjusted for rounding.
The Auto Clinic is a wholly owned subsidiary of Fast-Check Equipment Company. Fast-Check Equipment sells and leases 4-wheel alignment machines. The usual selling price of each machine is $35,000; it has a cost to Fast- Check Equipment of $25,000. On January 1, 2015, Fast-Check Equipment leased such a machine to Auto Clinic. The lease provided for payments of $9,096 at the start of each year for five years. The payments include $1,000 per year for maintenance to be provided by the seller. There is a bargain purchase price of $2,000 at the end of the fifth year. The implicit interest rate in the lease is 10% per year. The equipment is being
The amortization schedule for the lease prepared by Fast-Check Equipment is as attached:
Prepare the eliminations and
![Interest at 10% on
Previous Balance
Reduction of
Principal
Balance
Date
Payment
Principal
$ 8,096
8,096
$ 8,096
5,406
$35,000
26,904
21,498
1/1/15
1/1/16
1/1/17
1/1/18
1/1/19
12/31/19
$2,690
8,096
2,150
1,555
901
5,946
6,541
7,195
1,816
15,552
8,096
8,096
2,000
9,011
1,816
184*
Totals
$42,480
$7,480
$35,000
*Adjusted for rounding.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe6646c10-be33-40bf-9cd8-2870146e9946%2Fa1728f93-84ba-4813-a10e-a4caeac523a3%2Fsd45q8m.png&w=3840&q=75)
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