Problem
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2016. Edison purchased the equipment from International Machines at a cost of $252,967. (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 2 years (8 quarterly periods)
Quarterly lease payments $24,000 at Jan. 1, 2016, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter.
Economic life of asset 3 years
Interest rate charged by the lessor 12%
Respond to the question with the presumption that the guidance provided by the proposed Accounting Standards Update is being applied.
Required:
Prepare appropriate entries for Manufacturers Southern from the beginning of the lease through March 31, 2016.