Question

Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments manufactured the chronometers at a cost of $340,000. The chronometers have a fair value of $442,000. 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.)

Related Information:
Lease term		5 years (20 quarterly periods)
Quarterly lease payments	$	24,729 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter.
Economic life of asset		6 years
Estimated residual value of chronometers at end of lease term	$	19,086
Interest rate charged by the lessor		12%

Required:
1. Prepare appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021.

Answer 1

Answer: 378943 Date Journal D ebit Credit Requirement 1 1 1-Jan-21 Right-to-use asset 378943 Lease payable (To record the beginning of the lease for Newton Labs) Lease payment *((1-(1+r)-(n- 24729*((1-(1+0.03) -19)/0.03)+1 1) /r)+1 2 1-Jan-21 Lease payable 24729 Cash (To record the quarterly rental paid by Newton Labs) 247291 3 31-Mar-21 Interest expenses Lease payable Cash 10626 14103 247291 (To record the quarterly rental and interest paid by Newton Labs) 18947 431-Mar-21 Amortization Expense Right-to-use asset (242,622/20) 18947 (To record the amortization of Right-of-use equipment for Newton Labs)

Requirement 2 1 1-Jan-21 Lease receivable Right-to-use asset (To record the beginning of the lease and sales revenue for Brookline Instruments) 24729 21 1-Jan-21 Cash Lease receivable (To record the lease revenue received by Brookline Instruments) 24729 3 31-Mar-21 Cash Lease receivable 14103 10626 Interest revenue (To record the lease revenue and interest received by Brookline Instruments)

Work note: Lease interest schedule (carring value*2%) (Lease payment-interest) (carring value-Repayment of interest) Lease installment Interest Repayment of Principal Carring Value 이 ذرا اتارا 1 1 1 عام | 111AFA 247291 24729 24729 24729 247291 24729 24729 24729 24729 24729 24729 24729 247291 24729 247291 247291 24729 24729 24729 24729 24729 14103 14526 14961 15410 15873 163491 16839) 17344 178651 18401 18953 19521) 20107 207101 21331 21971 22631 23309 24009 10626.42 10203.34 9767.57 9318.73 8856.42 8380.24 7889.78 7384.61 6864.27 6328.33 5776.31 5207.73 4622.09 4018.89 3397.58 2757.64 2098.50 1419.58 720.30 378943 3542141 3401111 325586 310624 295214 279341 262993 2461541 2288091 210944 192544 173591 1540701 133963 113253 919211 699501 473191 240101 11 13 14 15 171 18 191 20 ol