mrk -tarktur lenin, Como.ny signs a lease agreement on January 1, 2017, to lease
ID: 2522028 • Letter: M
Question
mrk -tarktur lenin, Como.ny signs a lease agreement on January 1, 2017, to lease dectronic equipment to crane company. The term of the payments are required at the end of each year. The following information relates to this agreement 1. Crane has the option to purchase the equipment for $21,000 upon termination of the lease. 1It is not reasonably certain that Crane w lease is 2 years, and excerdse this option. ost of $220,000 and fair value of $259,000 to Larkspur Leasing. The usdtul economic life is 2 yeans, wilth a residual value of $21,000 Larkspur Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Larkspur Leasing is probable 4. Your answer is partially correct. Try again. Prepare the journal entries on the books of Larkspur Leasing to reflect the payments recelved under the lease and to recognize income for the years 2017 and 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.) Credit Date Account Titles and ExplanationExplanation / Answer
$2,39,952
Hence, the accounting entries for 2017 and 2018 would be
Effective Interest Table
To record this lease, the lessor would record (debit) the undiscounted annual payments ($2,58,095 = 2× $1,29,048) expected as a lease receivable
Lease Payment
Received
Net Investment
Recovered
Lease
Receivable
Unearned Interest
Revenue
Fair value of electronic equipment is $2,59,000 Less: Present Value of the residual value for 2 years @ 5% $19,048 Net Lease Payment (a)$2,39,952
PV of annuity for 2 years @ 5% is (b) 1.85941 Annual Lease Payment for 2 years @ 5% (a/b) $1,29,048Related Questions
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