Larkspur Leasing Company signs a lease agreement on January 1, 2025, lease electronic equipment to Crane Company. 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. Crane has the option to purchase the equipment for $27,000 upon termination of the lease. It is not reasonably certain that Crane will exercise this option. 2. The equipment has a cost of $330,000 and fair value of $368,000 to Larkspur Leasing. The useful economic life is 2 years, with a residual value of $27,000. 3. Larkspur Leasing desires to earn a return of 6% on its investment. 4. Collectibility of the payments by Larkspur Leasing is probable.Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Lease Receivable Cost of Goods Sold
Larkspur Leasing Company signs a lease agreement on January 1, 2025, lease electronic equipment to Crane Company. 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. Crane has the option to purchase the equipment for $27,000 upon termination of the lease. It is not reasonably certain that Crane will exercise this option. 2. The equipment has a cost of $330,000 and fair value of $368,000 to Larkspur Leasing. The useful economic life is 2 years, with a residual value of $27,000. 3. Larkspur Leasing desires to earn a return of 6% on its investment. 4. Collectibility of the payments by Larkspur Leasing is probable.Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Lease Receivable Cost of Goods Sold
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Larkspur Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Crane Company. 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. Crane has the option to purchase the equipment for $27,000 upon termination
of the lease. It is not reasonably certain that Crane will exercise this option. 2. The equipment has a cost of $330, 000 and fair value of $368,000 to Larkspur Leasing. The useful
economic life is 2 years, with a residual value of $27,000. 3. Larkspur Leasing desires to earn a return of 6% on its investment. 4. Collectibility of the payments by Larkspur Leasing is
probable. Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all
debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and
round final answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Lease Receivable Cost of Goods Sold
Transcribed Image Text:Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize
income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when
amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and
round final answers to O decimal places e.g. 5,275.)
Date
1/1/25
12/31/25
V
Account Titles and Explanation
Lease Receivable
Cost of Goods Sold
Sales Revenue
Inventory
Cash
Debit
368000
330000
60213
Credit
3681
330
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