Journal Entries for a Direct Financing Lease—Lessor
Refer to Practice 15 12. Assume that the lease is accounted for as a direct financing lease instead of as an operating lease. The interest rate implicit in the lease is 15%. Make the journal entries necessary on the lessor’s books to record (1) the signing of the lease, (2) the receipt of the initial $2,600 lease payment on the lease signing date, and (3) the recognition of interest revenue at the end of the first year.
Practice 15 12
Journal Entries for an Operating Lease—Lessor
On January 1, the lessor company purchased a piece of equipment for $10,000. The equipment has an expected life of five years with zero salvage value. The lessor company immediately leased the equipment under an operating lease agreement. The lease calls for the lessor company to receive lease payments of $2,600 per year to be received at the beginning of the year. Make the journal entries necessary on the books of the lessor company to record (1) the purchase of the equipment for cash, (2) the lease signing (including receipt of the first lease payment), and (3) depreciation of the leased equipment.