Natick Industries leased high-tech instruments from FraminghamLeasing on January 1, 2018. Natick has the option to renew thelease at the end of two years for an additional three years. Natickis subject to a $45,000 penalty after two years if it fails torenew the lease. Framingham Leasing purchased the equipment fromWaltham Machines at a cost of $321,800. (FV of $1, PV of $1, FVA of$1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriatefactor(s) from the tables provided.)
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| Related Information: |
| Lease term | 2 years (8 quarterly periods) |
| Lease renewal option for an additional | 3 years (12 quarterly periods) |
| Quarterly lease payments | $21,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, andDec. 31 thereafter. |
| Economic life of asset | 5 years |
| Interest rate charged by the lessor | 12% |
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Required:
Prepare appropriate entries for Natick Industries from thebeginning of the lease through March 31, 2018. Appropriateadjusting entries are made quarterly. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Round your answers to thenearest whole dollar amount.)
