Question

1-4 plz

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $5.9 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 9% (EV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3.& 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below.

Answer 1

Solution 1:
Journal Entries - American food service
Date	Particulars	Debit	Credit
01-Jan-21	Equipment Dr	$59,00,000
	To Notes Payable		$59,00,000
	(To record equipment purchased by issue of note)

Solution 2:
Equipment value	$59,00,000
/Cumulative PV factor at 9% for 4 periods	3.2397
Annual payment on note	1821156

Amortization of Installment Note
Year Ending Dec 31	Cash Payment	Effective Interest	Decrease in Balance	Outstanding balance
				$59,00,000
2021	$18,21,156	$5,31,000	$12,90,156	$46,09,844
2022	$18,21,156	$4,14,886	$14,06,270	$32,03,573
2023	$18,21,156	$2,88,322	$15,32,835	$16,70,739
2024	$18,21,156	$1,50,418	$16,70,739	$0
	$72,84,625	$13,84,625	$59,00,000

Solution 3:
Journal Entries - American food service
Date	Particulars	Debit	Credit
31-Dec-21	Interest expense Dr	$5,31,000
	Notes payable Dr	$12,90,156
	To Cash		$18,21,156
	(To record installment payment)
Solution 4:
Journal Entries - American food service
Date	Particulars	Debit	Credit
31-Dec-23	Interest expense Dr	$2,88,322
	Notes payable Dr	$15,32,835
	To Cash		$18,21,156
	(To record installment payment)