Question

Eastern Edison Company leased equipment from Hi-Tech Leasing on
January 1, 2018.

Other information: | |

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.

**Required:**

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.)**

Answer #1

Year | Annual Payments | [email protected]% | Present Value of Lease Payments | Interest | ||||

0 | 86000 | 1 | 86000 | 0 | ||||

1 | 86000 | 0.917431 | 78899.08 | 7100.917 | ||||

2 | 86000 | 0.84168 | 72384.48 | 13615.52 | ||||

3 | 86000 | 0.772183 | 66407.78 | 19592.22 | ||||

Total | 303691.3 | |||||||

Date/S.N. | Account title & Explanation | Debit | Credit | |||||

Amount in $ | Amount in $ | |||||||

2018 | ||||||||

Jan-01 | Investment in Lease | 303691.3 | ||||||

Leased asset | 303691.3 | |||||||

To record the transfer of leased asset to Lessee. | ||||||||

Jan-01 | Cash | 86000 | ||||||

Investment in Lease | 86000 | |||||||

2019 | ||||||||

Jan-01 | Cash | 86000 | ||||||

Interest/Finance charges received | 7101 | |||||||

Investment in Lease | 78899 | |||||||

Dec-31 | Interest/Finance charges received | 7101 | ||||||

Income summery | 7101 | |||||||

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appropriate journal entries for Hi-Tech Leasing for 2018. Assume a
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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:
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Assume a December 31 year-end. (If no entry is required for
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(Use appropriate factor(s) from the tables
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