Question

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2021. Insight Machines manufactured the equipment at a cost of $200,000 and lists a cash selling price of $250,177. Appropriate adjusting entries are made quarterly. (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.) Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $15,000 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter Economic life of asset 5 years Interest rate charged by the lessor 8% Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021. 2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2021, and on March 31, 2021.

Answer 1

Step-by-step explanation:

1

For Eye deal:

January 1,2018 Right of use asset 250177

Lease payable 250177

January 1,2018 Lease payable 15000

Cash 15000

March 31,2018 Interest expense 4704=(250177-15000)*8%*3/12

Lease payable 10296

Cash 15000

March 31,2018 Amortization expense 12509

` 250177/20

Right of use asset 12509

2

For insight machines:

January 1,2018 Lease receivable 250177

Cost of goods sold 200000

Sales revenue 250177

Equipment 200000

January 1,2018 Cash 15000

Lease receivable 15000

March 31,2018 Cash 15000

Interest revenue 4704 ` =(250177-15000)*8%*3/12

Lease receivable 10296