Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $2,520,000 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.)

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).

LESSEE:

LESSOR:

3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $2.1 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021

$151,093-beginning of each period 5 years (20 quarters) 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 5 years 8% $2,520,000 Mid-South Urologists Group Physicians' Leasing Journal entry worksheet Record lease. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021 Record entry Clear entry View general journal Journal entry worksheet Record lease. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021 Record entry Clear entry View general journal Journal entry worksheet 1 2 2 3 3 > Record cash received. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2021 Record entry Clear entry View general journal Journal entry worksheet