Question

Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment...

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.)

Homework Answers

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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