selling a leased asset during the lease term mdash lessor on december 31 of year 1 t 692650

Selling a Leased Asset During the Lease Term—Lessor

On December 31 of Year 1, the company, a lessor, sold some machinery that it had been leasing under a direct financing lease arrangement. On January 1 of Year 1 (after receipt of the lease payment for the year), the following account balances were associated with the lease:

The interest rate implicit in the lease is 10%. The leased machinery is sold for $65,000 cash. Make the journal entry or entries necessary on the books of the lessor to record this sale.