A lease agreement between Earth Leasing Corporation and New Moon Company is described in E21-8B.
In E21-8B, The following facts pertain to a noncancelable lease agreement between Earth Leasing Corporation and New Moon Company, a lessee.
Inception date October 1, 2014
Annual lease payment due at the beginning of
each year, beginning with October 1, 2014 ......... $31,415.63
Bargain purchase option price at end of lease term ...... $5,000.00
Lease term ....................... 6 years
Economic life of leased equipment ............ 12 years
Lessor’s cost .................... $120,000.00
Fair value of asset at October 1, 2014 ........... $160,000.00
Lessor’s implicit rate (not known by lessee) ........ 8%
Lessee’s incremental borrowing rate ........... 6%
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

Instructions
Refer to the data in E21-8B and do the following for the lessor.
(a) Compute the amount of the lease receivable at the inception of the lease.
(b) Prepare a lease amortization schedule for Earth Leasing Corporation for the 6-year lease term.
(c) Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2014, 2015, and 2016. The lessor’s accounting period ends on December 31. Earth Leasing does not use reversing entries.