Please explain each step and requirement. Thank you in advance! (: Eastern Ediso
ID: 2585486 • Letter: P
Question
Please explain each step and requirement. Thank you in advance! (:
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2016. Low-Tech purchased the equipment at a cost of $247,714 Other information Lease term Annual payments Life of asset Fair value of asset 3 years $89,000 on January 1 each year 3 years $247,714 8% Implicit interest rate Incremental rate 8% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2016. Assume a December 31 year-end. (If no entry is required for a transactionlevent, select "No journal entry required" in the first account field.) Debit 267.000 Date General Journal Credit Lease receivable Unearned rent revenue Inventory of equipment January 01, 2016 January 01, 2016 December 31, 2016 Red text indicates no response was expected in a cell; no points deducted.Explanation / Answer
Date Accounts titles and explanation Debit Credit jan 1 2016 Lease receivable 267000 Unearned interest revenue 19286 Equipment inventory 247714 jan 1 2016 Cash 89000 Lease receivable 89000 dec31 2016 Unearned interest revenue 12697.12 Interest revenue 12697.12 *Interest revenue (fair value of asset - annual payment) * 8% (247417 - 89000) * 8% 12697.12 *Unearned interest revenue = (267000 - 247714) 19286 *lease receivable = (89000 * 3) 267000