A lease agreement between Mooney Leasing Company and Rode Company is described in E21.10.

Instructions 

Refer to the data in E21.10 and do the following for the lessor. (Round all numbers to the nearest cent.)

a. Compute the amount of the lease receivable at commencement of the lease.

b. Prepare a lease amortization schedule for Mooney for the 5-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 2020 and 2021. The lessor’s accounting period ends on December 31. Reversing entries are not used by Mooney.

d. Suppose the collectibility of the lease payments was not probable for Mooney. Prepare all necessary journal entries for the company in 2020.

In E21.10

The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.

Commencement date                                                                                             May 1, 2020
Annual lease payment due at the beginning of each year, beginning
with May 1, 2020.........................................................................................................$20,471.94
Bargain purchase option price at end of lease term...............................................$ 4,000.00
Lease term.........................................................................................................................5 years
Economic life of leased equipment..............................................................................10 years
Lessor’s cost................................................................................................................$65,000.00
Fair value of asset at May 1, 2020............................................................................$91,000.00
Lessor’s implicit rate................................................................................................................8%
Lessee’s incremental borrowing rate....................................................................................8%

The collectibility of the lease payments by Mooney is probable.