Question

Help with Required 1 and 2.

Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $100,000. Manufacturers Southern's fiscal year ends December 31. (FV 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.) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate 2 years (8 quarterly periods) $16,500 at the beginning of each period 2 years $123,288 Required: 1. Show how International Machines determined the $16.500 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning. January 1 2021, and the second lease payment on April 1, 2021 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Show how International Machines determined the $16,500 quarterly lease payments. (Round your intermediate and final answers to the nearest whole dollar. Round your percentage answer to 1 decimal place.) PV factors based on Table or Calculator function PV of Lease Lease Payment

Answer 1

Solution 1:

PV Factor based on
Table or Calculator function	PVAD of $1
PV of lease	$123,288
n=	8
i=	2.00%
PV factor	7.47199
Lease Payment	$16,500

Solution 2:

International Machines
Journal Entries
Date	Particulars	Debit	Credit
1-Jan-21	Lease receivables Dr	$123,288.00
	Cost of goods sold Dr	$100,000.00
	To Sales revenue		$123,288.00
	To Inventory		$100,000.00
	(To record lease)
1-Jan-21	Cash Dr	$16,500.00
	To Lease receivables		$16,500.00
	(To record receipt of lease payment)
1-Apr-21	Cash Dr	$16,500.00
	To Lease receivables		$14,364.00
	To Interest revenue [($123,288 - $16,500)*2%]		$2,136.00
	(To record receipt of lease payment)