Answer:
a. The preparation of partial amortization is shown below:-
b. $2,892
Explanation:
a. Date Lease Effective Decrease in Outstanding
payment interest balance balance
July 1 $150,000
July 1 $5,376 $5,376 $144,624
($150,000 - $5,376)
Oct 1 $5,376 $2,892 $2,484 $142,140
( $5,376 - $2,892) ($144,624 - $2,484)
b. Interest expense on October 1 = $2,892
Working Note:-
Take the outstanding balance times 2% (8% annual = 2% quarterly)
So, the Effective interest = $144,624 × 0.02
= $2,892.48
