Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2021. Insight Machines manufactured the equipment at a cost of $210,000 and lists a cash selling price of $287,060. Appropriate adjusting entries are made quarterly. (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.) Related Information: Lease term Quarterly lease payments Economic life of asset Interest rate charged by the lessor 5 years (20 quarterly periods) $15,750 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter 5 years 4% Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. 2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. Complete this question by entering your answers in the tabs below.

1. Record the beginning of the lease for Eye Deal.

2. Record the lease payment made by Eye Deal on January 1, 2021.

3. Record the lease payment made by Eye Deal on March 31, 2021.

4. Record amortization of the right-of-use asset for Eye Deal.

Part 2

1. Record the beginning of the lease for Insight Machines.

2. Record the lease payment received by Insight Machines on January 1, 2021.

3. Record the lease payment received by Insight Machines on March 31, 2021

Answer 1

Required 1 :
No	Date	General Journal	Debit	Credit
1)	Jan 01 ,2021	Right of use asset (note 1 )	$ 287,060
		Lease payable		$ 287,060
		(To record beginning of the lease for Eye Deal )
2)	Jan 01 ,2021	Lease payable	$ 15,750
		Cash		$ 15,750
		(To record Lease Payment made by Eye Deal on jan 01 2021)
3)	Mar 31 ,2021	Interest Expense {($287,060 -$15,750)*1%}	$ 2,713
		Lease payable ($15,750 -$ 2,713 )	$ 13,037
		Cash		$ 15,750
		(To record Lease Payment made by Eye Deal on Mar 31, 2021)
4)	Mar 31 ,2021	Amortization Expense ($ 287,060 / 20 Periods )	$ 14,353
		Right of use asset		$ 14,353
		(To record amortization of the right of use asset for Eye Deal )

Required 2 :
No	Date	General Journal	Debit	Credit
1)	Jan 01 ,2021	Lease Receivable	$ 287,060
		Cost of goods sold	$ 210,000
		Sales revenue		$ 287,060
		Equipment		$ 210,000
		(To record the Beginning of the lease for Insight Machines )
2)	Jan 01 ,2021	Cash	$ 15,750
		Lease Receivable		$ 15,750
		(To record lease payment received by Insight Machines on Jan 01 ,2021)
	Mar 31 ,2021	Cash	$ 15,750
		Lease Receivable ($15,750 -$ 2,713 )		$ 13,037
		Interest Revenue   {($287,060-$ 15,750)*1%}		$ 2713
		(To record revenue and interest received by Insight Machine )

Note :

1) present value of an annuity Due of $ 1 ,n=20, i= 1% is 18.22601

$ 15,750 * 18.22601 = 287,060 ( Rounded)