The Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2020. The lease terms, provisions, and related events are as follows: 1. The lease term is eight years. The lease is noncancelable and requires equal rental payments of $85,202 to be made at the beginning of each year. 2. The fair value of the equipment is $500,000. The equipment has an estimated life of eight years and has a zero estimated value at the end of that time. 3. Rexon manufactured the equipment at a cost of $420,000. 4. The lease contains no renewal or bargain purchase option. 5. The interest rate implicit in the lease is 10%. 6. The initial direct costs are insignificant and assumed to be zero. 7. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Required 1. Determine what type of lease this is for Rexon Company. 2. Prepare an excel worksheet table summarizing the lease receipts and interest revenue earned by Rexon over the life of the lease. 3. Prepare journal entries for Rexon for the years 2020 and 2021.
The Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2020. The lease terms, provisions, and related events are as follows:
1. The lease term is eight years. The lease is noncancelable and requires equal rental payments of $85,202 to be made at the beginning of each year.
2. The fair value of the equipment is $500,000. The equipment has an estimated life of eight years and has a zero estimated value at the end of that time.
3. Rexon manufactured the equipment at a cost of $420,000.
4. The lease contains no renewal or bargain purchase option.
5. The interest rate implicit in the lease is 10%.
6. The initial direct costs are insignificant and assumed to be zero.
7. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.
Required 1. Determine what type of lease this is for Rexon Company.
2. Prepare an excel worksheet table summarizing the lease receipts and interest revenue earned by Rexon over the life of the lease.
3. Prepare
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