Required: 1.How should this lease be classified by Mid-South Urologists Group and by Physicians’ Leasing? 2.Prepare appropriate entries for both Mid-South Urologists Group and Physicians’ Leasing from the beginning of the lease through the second rental payment on Aril 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). 3.Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021.
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,720,000 and leased it to Mid-South Urologists Group, Inc., January 1, 2021. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1, and PVAD of $1)
Lease Description:
Quarterly lease payments $103,127-beginning of each period.
Lease term 5 years (20 quarters)
No residual value; no purchase option
Economic life of lithotripter 5 years
Implicit interest rate and lessee’s incremental borrowing rate 8%
Fair value of asset $1720,000
Required:
1.How should this lease be classified by Mid-South Urologists Group and by Physicians’ Leasing?
2.Prepare appropriate entries for both Mid-South Urologists Group and Physicians’ Leasing from the beginning of the lease through the second rental payment on Aril 1, 2021.
3.Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021.
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Required 1
How should this lease be classified by Mid-south Urologists Group and by Physicians’ Leasing?
Mid-South Urologist Group ____________________________
Physicians’ Leasing ____________________________
Required 2 Lease
Prepare appropriate entries for Mid-South Urologists Group from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31.) (If no entry is required for a transaction/event, select “No
- January 01, 2021, Record lease.
- January 01, 2021, Record cash payment.
- April 01, 2021, Record cash payment.
Required 2 Lessor
Prepare appropriate entries for Physicians’ Leasing from the beginning of the lese through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). (If no entry is required for a transaction/event, select “No journal entry required” in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.)
- January 01, 2021, Record lease.
- January 01, 2021, Record cash received.
- April 01, 2021, Record cash received.
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