Lessor Company and Lessee Company enter into a 5 - year, noncancelable, sales - type lease on
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Question:
Lessor Company and Lessee Company enter into a year, noncancelable, salestype lease on January Year for equipment that cost Lessor $useful life is years The fair value of the equipment is $ Lessor expects a return on the fair value of the asset over the year period of the lease. The equipment will have an estimated unguaranteed residual value of $ at the end of the fifth year of the lease. The lease provisions require five equal annual amounts, payable each January beginning with January Year Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs and that the lessor expects to be able to collect all lease payments.
Required:
Show how Lessor should compute the annual rental amounts.
Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor.
Prepare a table showing the accretion of the unguaranteed residual asset.
Prepare the journal entries for Lessor for Year Year and Year
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