On January 1 of the current year, Company A leased space from Company B. The 10-year...

 

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On January 1 of the current year, Company A leased space from Company B. The 10-year finance lease requires quarterly variable lease payments equal to 2% of Company A's sales revenue, with a quarterly sales minimum of $550,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Company A has generated quarterly sales of over $725,000. Company B's interest rate, known by Company A, was 8%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entries for Company A at the beginning of the lease on January 1 of the current year. 2. Prepare the journal entries for Company A on April 1 of the current year. First quarter sales were $735,000. Amortization is recorded quarterly. On January 1 of the current year, Company A leased space from Company B. The 10-year finance lease requires quarterly variable lease payments equal to 2% of Company A's sales revenue, with a quarterly sales minimum of $550,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Company A has generated quarterly sales of over $725,000. Company B's interest rate, known by Company A, was 8%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entries for Company A at the beginning of the lease on January 1 of the current year. 2. Prepare the journal entries for Company A on April 1 of the current year. First quarter sales were $735,000. Amortization is recorded quarterly.