Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $2,300,000 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)

Lease Description:
Quarterly lease payments	$	150,093beginning of each period
Lease term		5 years (20 quarters)
No residual value; no purchase option
Economic life of lithotripter		5 years
Implicit interest rate and lessee's incremental borrowing rate		12%
Fair value of asset	$	2,300,000

1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing.

Mid-South Urologists Group
Physicians' Leasing

2.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.

Journal entry worksheet

3..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.)

Journal entry worksheet

4.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.