On January 1, 2018, Taco King leased retail space from FogelmanProperties. The 10-year finance lease requires quarterly variablelease payments equal to 3% of Taco King’s sales revenue, with aquarterly sales minimum of $460,000. Payments at the beginning ofeach quarter are based on previous quarter sales. During theprevious 5-year period, Taco King has generated quarterly sales ofover $680,000. Fogelman’s interest rate, known by Taco King, was4%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVADof $1) (Use appropriate factor(s) from the tables provided.)Required: 1. Prepare the journal entries for Taco King at thebeginning of the lease at January 1, 2018. 2. Prepare the journalentries for Taco King at April 1, 2018. First quarter sales were$690,000. Amortization is recorded quarterly.
