what’s going on everybody John Bradshaw
here we’re still doing chapter 15 homework we’re on question six let’s
just go ahead and get started Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $200,000 and lists a cash selling price of $250,177 Appropriate adjusting entries are made quarterly.

Required:
1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.

2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018. record the beginning of the lease for
ideal right so first of all we got to find out what is the present value of
this lease so we know the payments we know the terms right I mean the periods
20 quarterly periods we also know that it’s 8 percent but it’s 8 percent on a
quarterly basis so it’s going to be a percent divided by four it’s going to
put us at two percent so we’re gonna look for because we’re paying this
upfront and paying the $15,000 on the very day that we get the
lise it’s gonna be present value of annuity do so we click this go to our
present value table take out my old classic calc II calculator and we’re
gonna go to two percent right because eight percent divided by four and we’re
gonna go to 20 periods which is gonna put us at it’s going to be right here I
like to put it on one of the corners of my calculator so I can kind of you know
I won’t lose track so it’s sixteen point six seven eight four six
I’m just verify this sixteen point six seven eight four six sixteen point seven
eight four six got it so that’s our number we’re gonna take that number and
we are going to multiply it by the quarterly these payments so multiplied
by 15,000 this is gonna be our present value 250,000 176 now going based on for
ideal they’re gonna have the right of use of this asset because they’re
leasing it out they’re getting the right to use it and it’s gonna go up it’s
gonna be debited by two hundred and fifty 176 177 250 177 during them fifty
thousand 177 right and they’re gonna have a lease payable these payable of
two hundred and fifty thousand 177 well that is record the entry now record the
quarterly rental paid by I dental so to record the quarterly rental paid we are
going to have a lease payable sorry guys I’m doing this with one hand
it’s gonna be 15,000 right because every quarter we’re paying $15,000 on this
lease and we’re also gonna have cash cash is going to be going up by 15,000
every quarter so we have released payable going up by 15k and every
quarter all in the first cash goes up by 15,000 record this entry record the
quarterly rental and interest paid by high dental so here we’re gonna have
interest expense oops right then we’re gonna have lease payable and then
finally our cash is gonna be going out okay so our cash is gonna go out every
month by 15,000 we know that for sure so we can see here that um we’re gonna be
doing $15,000 cash and the lease is AK is gonna be the total was 250,000 177 we
made a payment of $15,000 right so that leaves us with two hundred and thirty
five thousand one hundred seventy seven right and we’re gonna take that amount
and multiply it by two percent because it’s two percent every quarter right
remember the eight percent divided by a recorder two percent per quarter so
that’s gonna leave us with four thousand seven hundred and three or four dollars
when we round up with interest so our interest expense is going to be four
thousand seven hundred four dollars four thousand 704 it’s gonna be interest
expense and the difference is gonna be our lease payable so we’re gonna have
this – fifteen thousand which gonna be 10296 it’s gonna be at
least payable 10296 well boom let’s record that entry and finally record the
amortization of right to use equipment for high deal so we’re gonna have
amortization expense amortisation expense and we’re gonna have right of
use asset right here right of use asset okay before the amortization expense and
the right of you says we’re gonna go ahead and take the the face value which
was a two hundred and fifty thousand right
turjun fifty one hundred seventy seven and we’re gonna divide it by the number
of periods which is twenty periods and that’s gonna give us our amortization
expense for every quarter essentially so it’s twelve thousand 509 right because
we round out twelve thousand 509 twelve thousand 509 for the amortization
expense right of use twelve thousand 509 record the entry let’s go ahead and jump
over to requirement to now record the beginning of the lease for inside
machines so for them we’re gonna do the lease receivable oops
these receivable cost of goods sold sales revenue and equipment right okay so our lease
receivable was gonna be the present value which we had calculated earlier
let’s go back to requirement one you want to say that she yes and we had it
at 250 177 so at least receivable 250 177 cost of goods sold it says here in
the question that the manufacturer the equipment at two hundred thousand right
so these guys manufactured that at two hundred thousand sales revenue is going
to be two hundred and fifty 177 oh sorry about that 250 250 177 which I make this
quick Russian this one trying to and that looks pretty good let’s record this
entry record the lease record the lease revenue received by inside machines so
they had cash of the payment is fifteen thousand and they had a leased
receivable of fifteen thousand not bad record that record the lease revenue and
interest receivable by insight machines okay so they had a received cash of
fifteen thousand then they had a lease receivable they
also had interest revenue on this one interest revenue so so we have $15,000
cash we’re looking for the least receivable one interest revenue so to
get the interest revenue we got to figure out how much interest so we have
the total of the lease was 250 177 and then we had that payment at the
beginning of the year of $15,000 so that leaves us with two hundred thirty five
thousand 177 and then we are gonna find 2% of that because remember it’s a a
percent and then divided by four periods so it’s going to be two percent so
that’s gonna give us this amount for our interest let’s go back so the interest
revenue is going to be four thousand seven hundred and four four thousand 704
and we just kind of take the difference to find how much is a gonna be for the
least receivable fifteen thousand ten thousand two ninety six is gonna be for
the least receivable ten thousand two and ninety-six okay so that should be
just about it let’s go ahead and check the work and see how we did kind of
nervous about this one well damn baby answer is complete and
it’s also correct baby what’s that hopefully this kind of helped you guys
out hopefully you understand this a little bit more this one was kind of a
tough one for me to commit a while to make this video I’m probably gonna edit
it cuz I’ll try to make it a little shorter I want to try to keep these
videos short Justin took me a while but if you like if this video helped you out
guys please pull for my friends leave a like subscribe to my channel share this
with your buddies right and we’ll see you guys on the last
question question number seven in the next video yeah