Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a fair
Question:
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a fair value of $22,000,000. The lease agreement calls for five equal payments at the end of each year in the amount of 6,103,014. The useful life of the machine was expected to be five years with no residual value. The appropriate interest rate for this lease is 12%.
Other information:
PV of an ordinary annuity @12% for 5 periods: 3.60478
PV of an annuity due @12% for 5 periods: 4.03735
Required:
1. Determine the amount of each lease payment.
2. Prepare the journal entry for Peters Company at the beginning of the lease.
3. Prepare the journal entry for the first lease payment (ignore amortization).
4. Prepare the journal entry for the second lease payment (ignore amortization).
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair