Manufacturers Southern leased high-tech electronic equipmentfrom International Machines on January 1, 2018. InternationalMachines manufactured the equipment at a cost of $104,000.Manufacturers Southern's fiscal year ends December 31. (FV of $1,PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Useappropriate factor(s) from the tables provided.)
Related Information:
Lease term2 years (8 quarterly periods)
Quarterly rental payments$18,200 at the beginning of eachperiod
Economic life of asset2 years
Fair value of asset$135,990
Implicit interest rate8%
Required:
1. Show how International Machines determined the $18,200 quarterlylease payments.
2. Prepare appropriate entries for International Machines to recordthe lease at its beginning, January 1, 2018, and the second leasepayment on April 1, 2018.
