Question: American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018.

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton's implicit interest rate was 10%.
Required:
1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018.
2. Prepare an amortization schedule for the four-year term of the lease.
3. Prepare the appropriate entries related to the lease on December 31, 2018.
4. Prepare the appropriate entries related to the lease on December 31, 2020.
(You may wish to compare your solution to this exercise with that of E 14-18 which deals with a parallel situation in which the packaging machine was acquired with an installment note.)

Step by Step Solution

★★★★★

3.32 Rating (158 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Requirement 1 January 1 2018 Rightofuse asset 4000000 Lease payable 4000000 Requirement 2 4000000 31... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1265-B-C-A-C-B-A-M(2927).docx

120 KBs Word File

Students Have Also Explored These Related Cost Accounting Questions!

A person deposits $1000 at the end of each year into an annuity earning 5% interest compounded annually? How many years are required for the balance to reach $30,539? After how many years will the...

The average expenditure on Valentine's Day was expected to be $100.89 (USA Today, February 13, 2006). Do male and female consumers differ in the amounts they spend? The average expenditure in a...

Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following...

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2011. The lease agreement for the $4...

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4...

American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. The lease agreement for the $4...

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the...

American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2016. The lease agreement for the...

American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1 , 2 0 2 4 . The lease...

Formulate and prove a version of DeMorgan's Laws that applies to a finite collection of sets A1,..., An.

Calculate the missing amounts for each of the following firms: (Do not round intermediate calculations.) Variable Costs Contribution Operating Income (Loss) Sales Fixed Costs Margin Ratio S 320,000...

If a business's Debt to Equity ratio is decreasing from one year to the next, it shows the business is using lower financial leverage.

1.11 Is it wise for managers to evaluate a candidates postings on social networking sites such as Facebook as grounds for rejection before even interviewing a promising candidate? What might be some...

The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Obtain the relevant authoritative literature on stock...

Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific seven-, eight-, or nine-digit Codification citation (XXX-XX-XX-X) for accounting for each...

The 2018 annual report of Best Buy Co., Inc., reported profitable operations for the most recent six years. However, the company suffered a net loss in 2012. Best Buy reported the following for the...

Synovec Co , is growing quickly. Dividends are expected to grow at a rate of 2 5 percent for the next two years, with the growth rate falling off to a constant 5 percent thereafter. The required...

An organization using software with a site license is able to install software on blank

Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost $ 20 8 3 9 4 6 $ 50 $ 640,000 256,000 96,000...