On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at at cost of $1,657,721. The lease agreement specifies six annual payments of $360,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2025. The six year lease term ending December 31, 2026 (a year after the final payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase. on the basis of the Increase in the Consumer Price Index for the year just ended. Thus, the first payment will be $360,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 144. Southern routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 12%. ( EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the appropriate Journal entries for Wetick to record the lease at its beginning. 2. Assuming the CPI is 148 at that time, prepare the appropriate journal entries related to the lease for Wetick at December 31, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries for Wetick to record the lease at its beginning. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 2
On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at at cost of $1,657,721. The lease agreement specifies six annual payments of $360,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2025. The six year lease term ending December 31, 2026 (a year after the final payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase. on the basis of the Increase in the Consumer Price Index for the year just ended. Thus, the first payment will be $360,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 144. Southern routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 12%. ( EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the appropriate Journal entries for Wetick to record the lease at its beginning. 2. Assuming the CPI is 148 at that time, prepare the appropriate journal entries related to the lease for Wetick at December 31, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries for Wetick to record the lease at its beginning. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 2
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at a
cost of $1,657,721. The lease agreement specifies six annual payments of $360,000 beginning January 1, 2021, the beginning of the
lease, and at each December 31 thereafter through 2025. The six-year lease term ending December 31, 2026 (a year after the final
payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase
on the basis of the Increase in the Consumer Price Index for the year just ended. Thus, the first payment will be $360,000, and the
second and subsequent payments might be different. The CPI at the beginning of the lease is 144. Southern routinely acquires
diagnostic equipment for lease to other firms. The Interest rate in these financing arrangements is 12%. (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:
1. Prepare the appropriate journal entries for Wetick to record the lease at its beginning.
2. Assuming the CPI is 148 at that time, prepare the appropriate Journal entries related to the lease for Wetick at December 31, 2021.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Prepare the appropriate journal entries for Wetick to record the lease at its beginning. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to the nearest whole
dollar.)
View transaction list
Journal entry worksheet
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