Eastern Edison Company leased equipment from Hi-Tech Leasing on
January 1, 2018.
|Lease term||4 years|
|Annual payments||$86,000 on January 1 each year|
|Life of asset||4 years|
|Implicit interest rate||9%|
|PV, annuity due, 4 periods, 9%||3.5313|
|PV, ordinary annuity, 4 periods, 9%||3.2397|
|Hi-Tech's cost of the equipment||$303,692|
There is no expected residual value.
Prepare appropriate journal entries for Hi-Tech Leasing for 2018 and 2019. 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.)
|Year||Annual Payments||[email protected]%||Present Value of Lease Payments||Interest|
|Date/S.N.||Account title & Explanation||Debit||Credit|
|Amount in $||Amount in $|
|Jan-01||Investment in Lease||303691.3|
|To record the transfer of leased asset to Lessee.|
|Investment in Lease||86000|
|Interest/Finance charges received||7101|
|Investment in Lease||78899|
|Dec-31||Interest/Finance charges received||7101|
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