15-4 (Algo) Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,940,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) Lease Description: Quarterly lease payments Lease term No residual value; no purchase option Economic life of lithotripter Implicit interest rate and lessee's incremental borrowing rate Fair value of asset PV of lease payments Required: $208,010-beginning of each period 5 years (20 quarters) 5 years 16% $2,940,000 $2,940,000 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $2.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Lessee Required 2 Lessor Required 3 Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $2.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.) No Date General Journal Debit Credit 1 January 01, 2021 Lease receivable Cost of goods sold Sales revenue 2,940,000 Equipment 2 January 01, 2021 Cash 208,010 Lease receivable 208,010 3 April 01, 2021 Cash 208,010 Interest revenue 98,730 Lease receivable 109,280 Show less Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,940,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) Lease Description: Quarterly lease payments Lease term No residual value; no purchase option Economic life of lithotripter Implicit interest rate and lessee's incremental borrowing rate Fair value of asset PV of lease payments $208,010-beginning of each period 5 years (20 quarters) 5 years 16% $2,940,000 $2,940,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $2.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Lessee Required 2 Lessor Required 3 Prepare appropriate entries for Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.) No 1 Date January 01, 2021 Lease receivable Equipment 2 January 01, 2021 Cash Lease receivable General Journal Debit 2,940,000 Credit 2,940,000 208,010 208,010 3 April 01, 2021 Cash 208,010 Lease receivable Interest revenue 109,280 98,730 < Required 2 Lessee Required 3 > Show less Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,940,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) Lease Description: Quarterly lease payments Lease term No residual value; no purchase option Economic life of lithotripter Implicit interest rate and lessee's incremental borrowing rate Fair value of asset PV of lease payments $208,010-beginning of each period 5 years (20 quarters) 5 years 16% $2,940,000 $2,940,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $2.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 2 Lessee Required 3 Lessor Prepare appropriate entries for Mid-South Urologists Group from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.) No 1 Date January 01, 2021 Right-of-use asset Lease payable 2 January 01, 2021 Cash Lease receivable General Journal 3 April 01, 2021 Interest expense Lease payable Cash < Required 1 Required 2 Lessor > Show less Debit 2,940,000 Credit 2,940,000 208,010 208,010 109,280 98,730 208,010