American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4 million (fair valueand present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton’s implicit interestrate was 10%.Required:1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018.2. Prepare an amortization schedule for the four-year term of the lease.3. Prepare the appropriate entries related to the lease on December 31, 2018.4. Prepare the appropriate entries related to the lease on December 31, 2020.

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4 million (fair valueand present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton’s implicit interestrate was 10%.Required:1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018.2. Prepare an amortization schedule for the four-year term of the lease.3. Prepare the appropriate entries related to the lease on December 31, 2018.4. Prepare the appropriate entries related to the lease on December 31, 2020.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 27E

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