Question

Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment at a cost of $85,000.

Other information:
Lease term	4 years
Annual payments	$30,000 on January 1 each year
Life of asset	4 years
Fair value of asset	$105,939
Implicit interest rate	9%
Incremental rate	9%

There is no expected residual value.

Required:
Prepare appropriate journal entries for Hi-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)

Answer 1

ANSWER

Date	General Journal	Debit	Credit
January 1	Lease receivable($30,000 x 4)	$120,000
	Cost of goods sold	$85,000
	Unearned interest revenue		$14,061
	Sales revenue		$105,939
	Equipment inventory		$85,000
	Cash	$30,000
	Lease receivable		$30,000
December 31	Unearned interest revenue[($105,939- $30,000 ) x 9%]	$6,835
	Interest revenue		$6,835

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