Question

Exercise 15-7 (Algo) Sales-type lease with no selling profit; lessor [LO15-2] Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $140,653. (FV of $1. PV of $1. FVA of S1. PVA of $1. FVAD of S1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $18,200 at the beginning of each period Economic life of asset 2 years Fair value of asset $140,653 Implicit interest rate 4% (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal year ends December 31 Complete this question by entering your answers in the tabs below. Amort Schedule General Journal Prepare a lease amortization schedule for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal year ends December 31. (Round your intermediate and final answers to the nearest whole dollar. Enter all amounts as positive values.) Payment Date Lease Payments Effective Interest Decrease in Balance Lease Balance $ 140 653 $ 18,000 18,000 $ 18,000 18,000 os 1.227) 122653 105 880 01/01/2021 01/01/2021 04/01/2021 07/01/2021 10/01/2021 01/01/2022 04/01/2022 07/01/2022 10/01/2022 Total $ 05 0 $ 0 General Journal

Answer 1

1.) LEASE AMORTIZATION SCHEDULE

Payment Date	Lease Payments	Effective Interest	Decrease in Balance	Lease Balance
01/01/21				140,653
01/01/21	18,200		18,200	122,453
04/01/21	18,200	1,225	16,975	105,478
07/01/21	18,200	1,055	17,145	88,333
10/01/21	18,200	883	17,317	71,016
01/01/22	18,200	710	17,490	53,526
04/01/22	18,200	535	17,665	35,861
07/01/22	18,200	359	17,841	18,020
10/01/22	18,200	180	18,020	0
Total	145,600	4,947	140,653

Effective interest = Preceding outstanding balance x 1% [4% per year, 1% per quarter]

Decrease in Balance = Lease payments - Effective interest

Lease balance = Preceding lease balance - Decrease in balance

2.) JOURNAL ENTRIES:

Date	Account Title and Explanation	Debit $	Credit $
01/01/21	Lease receivable	140,653
	Lease Equipment		140,653
	(To record the lease)
01/01/21	Cash	18,200
	Lease  receivable		18,200
	(To record cash received)
04/01/21	Cash	18,200
	Lease receivable		16,975
	Interest revenue		1,225
	(To record cash received)
07/01/21	Cash	18,200
	Lease receivable		17,145
	Interest revenue		1,055
	(To record cash received)
10/01/21	Cash	18,200
	Lease receivable		17,317
	Interest revenue		883
	(To record cash received)
12/31/21	Interest receivable	710
	Interest revenue		710
	(To record interest expense)
01/01/22	Cash	18,200
	Lease receivable		17,490
	Interest revenue		710
	(To record cash received)

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