Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $101,000. Manufacturers Southern's fiscal year ends December 31. Required: 1. Show how International Machines determined the $18,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $101,000. Manufacturers Southern's fiscal year ends December 31. Required: 1. Show how International Machines determined the $18,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $101,000. Manufacturers Southern's fiscal year ends December 31.
Required:
1. Show how International Machines determined the $18,000 quarterly lease payments.
2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.
Transcribed Image Text:PV factors based on
Table or Calculator function:
PV of Lease
n =
Lease Payment
Transcribed Image Text:Related Information:
2 years (8 quarterly periods)
$18,000 at the beginning of each period
2 years
$132, 289
10%
Lease term
Quarterly rental payments
Economic life of asset
Fair value of asset
Implicit interest rate
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