On January 1, 2021, QuickStream Communications leased telephone equipment from Diglum, Inc. Digium's cash selling price for the equipment is $1,607,604. The lease agreement specifies six annual payments of $380,000 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) 3%. The CPI at the beginning of the lease is 110. Diglum routinely leases equipment to other firms. The interest rate in these lease arrangements is 11%. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 5) (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.) No. 1. Answer is complete but not entirely correct. General Journal Date January 01, 2021 Right-of-use asset Lease payable Debit 1.607.604 Credit 1.607 604
On January 1, 2021, QuickStream Communications leased telephone equipment from Diglum, Inc. Digium's cash selling price for the equipment is $1,607,604. The lease agreement specifies six annual payments of $380,000 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) 3%. The CPI at the beginning of the lease is 110. Diglum routinely leases equipment to other firms. The interest rate in these lease arrangements is 11%. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 5) (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.) No. 1. Answer is complete but not entirely correct. General Journal Date January 01, 2021 Right-of-use asset Lease payable Debit 1.607.604 Credit 1.607 604
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2021, QuickStream Communications leased telephone equipment from Diglum, Inc. Digium's cash selling price for the
equipment is $1,607604. The lease agreement specifies six annual payments of $380,000 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) 3%. The CPI at the beginning of the lease is 110. Diglum routinely leases equipment to other firms. The interest rate in these lease
arrangements is 11%. (EV OLS1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 5) (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.)
No.
1.
Answer is complete but not entirely correct.
General Journal
Date
January 01, 2021 Right-of-use asset
Lease payable
Debit
1,607,604
Credit
1.607.604
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