Question

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $139,107.

Related Information:

Lease term 2 years (8 quarterly periods)
Quarterly rental payments $18,000 at the beginning of each period
Economic life of asset 2 years
Fair value of asset $139,107
Implicit interest rate 4% (Also lessee’s incremental borrowing rate)

Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31.

Answer 1

Amortization table

Opening liability Installments Interest Principal payment Closing liability

139,108 18000 1211 16788.92498 122,319

122,319 18000 1043 16956.81423 105,362

105,362 18000 873 17126.38238 88,235

88,235 18000 702 17297.6462 70,938

70,938 18000 529 17470.62266 53,467

53,467 18000 354 17645.32889 35,822

35,822 18000 178 17821.78218 18,000

18,000 18000 0 0 0