Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term.
Transcribed Image Text:**Journal Entries for Federated Lease Transactions**
### Instructions:
Prepare the appropriate entries for Federated from the beginning of the lease through the end of the lease term. Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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### Transaction Details:
1. **Date:** January 01, 2021
- **General Journal:**
- Debit: Right-of-use asset
- Credit: Lease payable
2. **Date:** January 01, 2021
- **General Journal:**
- Debit: Lease payable $32,000
- Credit: Cash $32,000
3. **Date:** December 31, 2021
- **General Journal:** No Transaction Recorded
4. **Date:** December 31, 2021
- **General Journal:** No Transaction Recorded
5. **Date:** December 31, 2022
- **General Journal:** No Transaction Recorded
6. **Date:** December 31, 2022
- **General Journal:** No Transaction Recorded
---
### Notes:
- Ensure all entries are recorded accurately and promptly.
- The lease payable is settled on January 1, 2021, through a cash payment.
- For periods where no transactions occur, ensure that it is noted accordingly.
Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.
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