Question

Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Chance purchased the equipment at a cost of $1,350,000. Chance elected the short-term lease option. Appropriate adjusting entries are made annually.

Required:

Prepare appropriate entries for Chance from the beginning of the lease through December 31, 2018.

 

Related Information:

Lease term

1 year (4 quarterly periods)

Quarterly lease payments

$54,000 at Jan. 1, 2018, and at Mar. 31, June 30, and Sept. 30.

Economic life of asset

5 years

Interest rate charged by the lessor

7%