On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $1,618,008. The lease agreement specifies six annual payments of $350,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. 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) 2%. The CPI at the beginning of the lease is 140. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Subject: accounting 

On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc.
Digium's cash selling price for the equipment is $1,618,008. The lease agreement specifies six annual
payments of $350,000 beginning December 31, 2021, and at each December 31 thereafter through
2026. 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) 2%. The CPI at the beginning of the lease is 140. Digium
routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. (FV of
$1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the
tables provided.)
Required:
Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of
January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required"
in the first account field. Round your answers to the nearest whole dollar amount.)
View transaction list
Journal entry worksheet
1
Record the beginning of the lease for QuickStream Communications.
Note: Enter debits before credits.
Date
January 01, 2021 Right-of-use asset
Lease payable
General Journal
Debit
Credit
Transcribed Image Text:On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $1,618,008. The lease agreement specifies six annual payments of $350,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. 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) 2%. The CPI at the beginning of the lease is 140. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.) View transaction list Journal entry worksheet 1 Record the beginning of the lease for QuickStream Communications. Note: Enter debits before credits. Date January 01, 2021 Right-of-use asset Lease payable General Journal Debit Credit
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