Prepare appropriate entries for Natick Industries

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Question - Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2021. Natick has the option to renew the lease at the end of two years for an additional three years. Natick is subject to a $60,000 penalty after two years if it fails to renew the lease. Framingham Leasing purchased the equipment from Waltham Machines at a cost of $400,283.

Related Information: Lease term2 years (8 quarterly periods)Lease renewal option for an additional 3 years (12 quarterly periods)Quarterly lease payments$24,000 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. Economic life of asset 5 years Interest rate charged by the lessor 8%.

Required - Prepare appropriate entries for Natick Industries from the beginning of the lease through March 31, 2021. Appropriate adjusting entries are made quarterly.

Reference no: EM132478140

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