E21.8 (LO.3) (Lessor Entries, Sales-Type Lease) Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2022. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2022. Crosley had purchased the machine during 2021 for $160,000. Collectibility of ease payments by Crosley is probable. Crosley set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease. Instructions a. Compute the amount of the lease receivable. b. Prepare all necessary journal entries for Crosley for 2022. c. Suppose the collectibility of the lease payments was not probable for Crosley. Prepare all necessary journal entries for the company in 2022. d. Suppose at the end of the lease term, Crosley receives the asset and determines that it actually has a fair value of $1,000 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Crosley at the end of the lease term.

E21.8 (LO.3) (Lessor Entries, Sales-Type Lease) Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2022. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2022. Crosley had purchased the machine during 2021 for $160,000. Collectibility of ease payments by Crosley is probable. Crosley set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease. Instructions a. Compute the amount of the lease receivable. b. Prepare all necessary journal entries for Crosley for 2022. c. Suppose the collectibility of the lease payments was not probable for Crosley. Prepare all necessary journal entries for the company in 2022. d. Suppose at the end of the lease term, Crosley receives the asset and determines that it actually has a fair value of $1,000 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Crosley at the end of the lease term.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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