Skysong Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Sheridan
Question:
Skysong Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Sheridan Company. This is a sales-type lease. The term of the non-cancelable lease is 2 years, and payments are required at
the end of each year. The following information relates to this agreement:
1. Sheridan has the option to purchase the equipment for $18,000upon termination of the lease. It is not reasonably certain that Sheridan will exercise this option.
2. The equipment has a cost of $160,000and fair value of $189,000 to Skysong Leasing. The useful economic life is 2 years, with a residual value of$18,000.
3. Skysong Leasing desires to earn a return of5% on its investment.
4. Collect ibility of the payments by Skysong Leasing is probable.
Prepare the journal entries on the books of Skysong Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021.Round to the nearest dollar.
(The $18,000option to purchase does not count as a bargain purchase, the expected residual value at the end of the lease term is also $18,000.)
Expert Answer:
Fair value 189000 PV 5 at 2 years is 090703 Residual value will be 18000 0907... View the full answer
