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E15-5 Manufacturers Southern leased high-tech electronic equipment

E15-5 Manufacturers Southern leased high-tech electronic equipment
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Solution Guide / Answer Key:

 

E 15–5: Sales-type lease; lessor

LO15–6


Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2013. International Machines manufactured the equipment at a cost of $85,000.

 

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%

(Also lessee's incremental borrowing rate) 

 

Required:

1. Show how International Machines determined the $15,000 quarterly rental payments

2. Prepare appropriate entries for International Machines to record the lease at its inception, January 1, 2013, and the second rental payment on April 1, 2013.

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