Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $55,000 for the equipment in its inventory account. The lease commenced on January 1 with the first annual payment of $18,500 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $68,880, and no residual or salvage value. The implicit rate of the lease is 5% and collectibility of the lease payments from Parker is probable. Record Franklin's required journal entry to record interest revenue on December 31. Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Dec. 31 Lease Receivable Interest Revenue X 0✔ Cr. 0✔ 0 x

Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $55,000 for the equipment in its inventory account. The lease commenced on January 1 with the first annual payment of $18,500 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $68,880, and no residual or salvage value. The implicit rate of the lease is 5% and collectibility of the lease payments from Parker is probable. Record Franklin's required journal entry to record interest revenue on December 31. Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Dec. 31 Lease Receivable Interest Revenue X 0✔ Cr. 0✔ 0 x

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Recording Sales-Type Lease Journal Entries- No Residual Value
Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of
$55,000 for the equipment in its inventory account. The lease commenced on January 1 with the first annual payment of
$18,500 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $68,880, and no residual or
salvage value. The implicit rate of the lease is 5% and collectibility of the lease payments from Parker is probable. Record
Franklin's required journal entry to record interest revenue on December 31.
Note: Round your answers to the nearest whole dollar.
Date
Account Name
Dr.
Dec. 31 Lease Receivable
Check
Interest Revenue
◆
0✓
Cr.
0
0 x

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