FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year.
2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has a residual value of $20,000 which is guaranteed by Davis Company (the lessee).
3. Davis agrees to pay all executory costs directly to a third party.
4. The interest rate implicit in the lease is 14%.
5. The initial direct costs are insignificant and assumed to be zero.
6. It is probable that Edom will collect the lease payments.
 
Required:
1. Next Level Assuming that the lease is a sales-type lease, calculate the selling price.
2. Prepare a table summarizing the lease receipts and interest income earned by Edom.
3. Prepare journal entries for Edom for the years 2019 and 2020.
 
 
 
 
 
 
 
 
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