Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $105,000. Manufacturers Southern's fiscal year ends December 31. (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 term2 years (8 quarterly periods)Quarterly rental payments$17,000 at the beginning of each periodEconomic life of asset2 yearsFair value of asset$127,024Implicit interest rate8% Required:1. Show how International Machines determined the $17,000 quarterly lease payments.2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.

An annuity table present a method for determining the present value of an annuity. It contains a…

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Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...

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Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $105,000. Manufacturers Southern's fiscal year ends December 31. (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	2 years (8 quarterly periods)
Quarterly rental payments	$17,000 at the beginning of each period
Economic life of asset	2 years
Fair value of asset	$127,024
Implicit interest rate	8%

Required:
1. Show how International Machines determined the $17,000 quarterly lease payments.
2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.

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