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Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,710,000 and
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,710,000 and leased it to Mid South Urologists Group, Inc., on January 1, 2016. (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 ternm No residual value; no BPCO Economic life of lithotripter Implicit interest rate and lessee's incremental borrowing rate Fair value of asset $ 191,737-beginning of each period 5 years (20 quarters) 5 years 16% $2,710,000 Collectibility of the lease payments is reasonably assured, and there are no lessor costs yet to be incurred. Required 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? Mid-South Urologists Group Physicians' Leasing Capital lease Capital lease: Direct financing lease 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the inception of the lease through the second rental payment on April 1, 2016. Depreciation is 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.)
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