Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the
Question:
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $85,000. Manufacturers Southern's fiscal year ends December 31.
Related Information:
Lease term ...................................... 2 years (8 quarterly periods)
Quarterly rental payments ...... $15,000 at the beginning of each period
Economic life of asset .................................................. 2 years
Fair value of asset .................................................... $112,080
Implicit interest rate .......................................................... 8%
Required:
1. Show how International Machines determined the $15,000 quarterly lease payments.
2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2018, and the second lease payment on April 1, 2018?
Step by Step Answer:
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas