Refer to the information in P12–10. Assume that collectibility of the payments is not reason- ably certain and that the lessor uses the straight-line depreciation method.
1. Prepare the necessary journal entries for Railcar for 2014 and 2015 under the lease.
2. How much total income before tax does the firm expect to recognize over the life of the lease in these altered circumstances?
3. Is the amount in requirement 2 the same as, more than, or less than the total amount of income before tax that is recognized in P12–10?