On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cashselling price for the equipment is $1,306,578. The lease agreement specifies six annual payments of $300,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higherof (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the leaseis 120. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 10%.Required:Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2018.
On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cash
selling price for the equipment is $1,306,578. The lease agreement specifies six annual payments of $300,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher
of (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the lease
is 120. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 10%.
Required:
Prepare the appropriate
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
