Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $85,000. Manufacturers Southern’s fiscal year ends December 31.
Related Information:
Lease term …………………………………..2 years (8 quarterly periods)
Quarterly rental payments ……………$15,000 at the beginning of each period
Economic life of asset ……………………2 years
Fair value of asset ………………………..$112,080
Implicit interest rate ………………………..8%
Required:
1. Show how International Machines determined the $15,000 quarterly lease payments.
2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.
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