On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King's sales revenue, with a quarterly sales minimum of $500,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of over $700,000. Fogelman's interest rate, known by Taco King, was 4%. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of 51. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $3) Required: 1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. 2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $710,000. Amortization is recorded quarterly.
On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King's sales revenue, with a quarterly sales minimum of $500,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of over $700,000. Fogelman's interest rate, known by Taco King, was 4%. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of 51. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $3) Required: 1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. 2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $710,000. Amortization is recorded quarterly.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 1P
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Question
![On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable
lease payments equal to 3% of Taco King's sales revenue, with a quarterly sales minimum of $500,000. Payments at the beginning of
each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of
over $700,000. Fogelman's interest rate, known by Taco King, was 4%.
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of 51. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
Required:
1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024.
2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $710,000. Amortization is recorded quarterly.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb9d70f6f-f7a9-40f1-ba60-6b283f12cc66%2F6ea5ccb7-bc00-4291-8f52-625296357c61%2Fb9klk78_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable
lease payments equal to 3% of Taco King's sales revenue, with a quarterly sales minimum of $500,000. Payments at the beginning of
each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of
over $700,000. Fogelman's interest rate, known by Taco King, was 4%.
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of 51. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
Required:
1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024.
2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $710,000. Amortization is recorded quarterly.
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