Exercise $9-9($Algo$)$ Compare installment notes and leases $($LO$9-2,9-3)$

January $1,2024,$ Paradise Partners decides to upgrade recreational equipment at its resorts. The company is contemplating whether to

purchase or lease the new equipment. Use PV of $$1$ and PVA of $$1.($Use appropriate factor$($s$)$ from the tables provided.$)$

Required:

The company can purchase the equipment by borrowing $$218,000$ with a $25-$month, $12\%$ installment note. Payments of $$9,898\mathrm{.}67$

are due at the end of each month, and the first installment is due on January $31,2024.$ Record the issuance of the installment note

payable for the purchase of the equipment.

The company can sign a $25-$month lease for the equipment by agreeing to pay $$7,900\mathrm{.}78$ at the end of each month, beginning

January $31,2024.$ At the end of the lease, the equipment must be returned. Assuming a borrowing rate of $12\%,$ record the lease.

As of January $1,2024,$ does the installment note or the lease have a greater effect on increasing the company's amount of reported

debt, and by how much?

Suppose the equipment has a total value of $$123,000$ at the end of the $25-$month period, which option $($purchasing with installment

note or leasing$)$ would likely be better?

Complete this question by entering your answers in the tabs below.

Req $1$ and $2$

The company can purchase the equipment by borrowing $$218,000$ with a $25-$ month, $12\%$ installment note. Payments of $$9,898\mathrm{.}67$

are due at the end of each month, and the first installment is due on January $31,2024.$ Record the issuance of the installment note

payable for the purchase of the equipment.

The company can sign a $25-$month lease for the equipment by agreeing to pay $$7,900\mathrm{.}78$ at the end of each month, beginning

January $31,2024.$ At the end of the lease, the equipment must be returned. Assuming a borrowing rate of $12\%,$ record the lease.

$($If no entry is required for a particular transaction$/$event$,$ select $"$No Journal Entry Required" in the first account field.$)$

Journal entry worksheet

$(1)2$

The company can sign a $25-$month lease for the equipment by agreeing to pay

$$7,900\mathrm{.}78$ at the end of each month, beginning January $31,2024.$ At the end

of the lease, the equipment must be returned. Assuming a borrowing rate of

$12\%,$ record the lease.

Note: Enter debits before credits.