Exercise 15-2 Finance lease; calculate lease payments [LO15-2]

American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4.8 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 six years with no residual value. Barton and Bartons implicit interest rate was 9%. (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.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018. 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, 2018 and 2020.

Requirement 3 and 4

• Record the lease payment and interest expense for American Food Services.
• Record the amortization of right-of-use asset for American Food Services.
• Record the lease payment and interest expense for American Food Services.
• Record the amortization of right-of-use asset for American Food Services.

Req 1 Req 2 Req 3 and 4 Prepare an amortization schedule for the four-year term of the lease. (Enter your answers in whole dollars and not in milli Round your answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Lease Effective Interest Outstanding Balance Year Balance ents 2018 2019 2020 2021 Total Req1 Req 3 and 4 View transaction list Journal entry worksheet Record begining of the lease for American Food Services. Note: Enter debits before credits Debit Date General Journal Credit January 01, 2018 Clear entry Record entry View general journal