The Lessor Company leases equipment to the Lessee Company on January 1, 2020. The lease is appropriately recorded as a purchase for accounting purposes for Lessee and as a sale for accounting purposes for Lessor. The lease is for a ten-year period. Equal annual payments under the lease are $30,000 and are due on January 1 of each year. The first payment is made on January 1, 2022. The cost of the equipment on Lessor's accounting records is $100,000. The equipment has an estimated useful life of ten years with no residual value expected. The of interest contemplated by Lessor and Lessee is 9 percent. Assume that the present value of the lease payments equals the market value of the equipment (selling price). Assume this is a sales- type lease. A.Prepare the entry or entries required for Lessor on January 1, 2022. A.Prepare the entry or entries required for Lessor on December 31, 2022. A.Prepare the entry or entries required for Lessor on January 1, 2023.

The Lessor Company leases equipment to the Lessee Company on January 1, 2020. The lease is appropriately recorded as a purchase for accounting purposes for Lessee and as a sale for accounting purposes for Lessor. The lease is for a ten-year period. Equal annual payments under the lease are $30,000 and are due on January 1 of each year. The first payment is made on January 1, 2022. The cost of the equipment on Lessor's accounting records is $100,000. The equipment has an estimated useful life of ten years with no residual value expected. The of interest contemplated by Lessor and Lessee is 9 percent. Assume that the present value of the lease payments equals the market value of the equipment (selling price). Assume this is a sales- type lease. A.Prepare the entry or entries required for Lessor on January 1, 2022. A.Prepare the entry or entries required for Lessor on December 31, 2022. A.Prepare the entry or entries required for Lessor on January 1, 2023.

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

Accounting
The Lessor Company leases equipment to the
Lessee Company on January 1, 2020. The lease
is appropriately recorded as a purchase for
accounting purposes for Lessee and as a sale for
accounting purposes for Lessor. The lease is for
a ten-year period. Equal annual payments under
the lease are $30,000 and are due on January 1
of each year. The first payment is made on
January 1, 2022. The cost of the equipment on
Lessor's accounting records is $100,000. The
equipment has an estimated useful life of ten
years with no residual value expected. The of
interest contemplated by Lessor and Lessee is 9
percent. Assume that the present value of the
lease payments equals the market value of the
equipment (selling price). Assume this is a sales-
type lease.
A.Prepare the entry or entries required for Lessor
on January 1, 2022.
A.Prepare the entry or entries required for Lessor
on December 31, 2022.
A.Prepare the entry or entries required for Lessor
on January 1, 2023.
A.Prepare the entry or entries required for Lessor
on December 31, 2023.

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