Terms of a lease agreement and related facts were: a. Leased asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $20,873, beginning January 1. c. Lessor’s implicit rate when calculating annual rental payments was 10%. d. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $2,062. e. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its inception, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $100,000 to acquire the asset (direct financing lease). Also assume that adjusting the net investment by initial direct costs reduces the effective rate of interest to 9%. 3. The lease term is six years and the lessor paid $85,000 to acquire the asset (sales-type lease).
Terms of a lease agreement and related facts were: a. Leased asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line
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