Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2013. Manufacturers Southern has the option to renew the lease at the end of two years for an additional three years. Manufacturers Southern is subject to a $45,000 penalty after two years if it fails to renew the lease. Edison purchased the equipment from International Machines at a cost of $250,177.

Required:
Prepare appropriate entries for Manufacturers Southern from the commencement of the lease through March 31, 2013. Appropriate adjusting entries are madequarterly.

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Related Information: Lease term Lease renewal option for an additional 3 years Quarterly lease payments 2 years (8 quarterly periods) $15,000 at Jan. 1, 2013, and at Mar. 31 June 30, Sept. 30, and Dec. 31 thereafter. Economic life of asset years 8% ate charged by the lessor