Question

Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments manufactured the chronometers at a cost of $120,000. The chronometers have a fair value of $156,000. 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 approprlate factor(s) from the tables provided.) Related Information: Lease term Quarterly lease payments Economic life of asset Estimated residual value of chronometers at end of lease term Interest rate charged by the lessor 5 years (20 quarterly periods) $8,730 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. 6 years $6,738 8% 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 is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2021, and on March 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) No Date General Journal Debit Credit 1 156,000 X 120,000 X January 01, 2021 Lease receivable Cost of goods sold Sales revenue Equipment Oooo 145,603 120,000 < Required 1 Required 2 >

Answer 1

Answer:

1)
Present value of periodic lease payments = $8730 x 15.32380	133776.77
present value of an annuity due of $1: n=20, i=2%	16.67846
1-Jan	Right of use Assets	$ 133776.77
	LeasePayable (Present value of minimum lease payments)		$133776.77
1-Jan	Lease Payable	$   8730
	Cash (Quarterly lease Payment)		$  8730
31-Mar	Interest expense (2% x [$133776.77- 8730])	$     2500.94
	Lease payable (difference)	$   6229.06
	Cash (lease payment)		$  8730
31-Mar	Amortization Expenses (133776.77/20)	$   6688.84
	Right of use Assets		$  6688.84
2)
1-Jan	Lease receivable ( ([8730 × 16.67846**] + [$6738 × .67297*])	$ 150137.43
	Cost of good Sold ($120000 - [$6738 × .67297*])	$ 115465.53
	Sales Revenue [$150137.43- ([$6738 × .67297*])		$145602.96
	Equipment		$120000
1-Jan	Cash	$   8730
	Lease receivable		$  8730
31-Mar	Cash	$   8730
	Lease receivable		$  5901.85
	Interest revenue ($150137.43- $8730) x 2%		$    2828.15