Albert Corp. a private corporation that adheres to ASPE, is a manufacturer of truck trailers. On, January 1, 2020 Albert leases ten trailers to Einstein Inc. under a six year non-cancellable lease agreement. The following information about the lease and the trailers is provided.

1. Equal annual payments (due on December 31 each year) will be payable to provide Albert with an 8% return on their investment.

2. Title to the trailers will pass to Einstein at the end of the lease.

3. At January 1, 2020, the fair value of each trailer is $50,000. The cost of each year trailer to Albert Corp. is $45,000. Each trailer has an expected useful life of nine years.

4. Collectibility of the lease payments is reasonably assured and any unreimbursed costs under the lease that are likely to be incurred by Albert can be reasonably estimated.

Instructions:

a.) What type of lease is this for the lessor? Discuss.

b.) Calculate the annual lease payment. Present value factor for 6 periods at 8% is 4.62288. Round to the nearest dollar.

c.) Prepare a lease amortization schedule for Albert Corp. for the first three years.

d.) Prepare the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of the lease rentals, and the recognition of income. Assume the use of a perpetual inventory system and round all amounts to the nearest dollar.