Berne Company (lessor) enters into a lease with Fox Company to lease equipment to Fox beginning January 1, 2019. The lease terms, provisions, and related events are as follows:

1.	The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $50,000 to be made at the end of each year.
2.	The equipment costs $130,000. The equipment has an estimated life of 4 years and an estimated residual value at the end of the lease term of zero.
3.	Fox agrees to pay all executory costs directly to a third party.
4.	The interest rate implicit in the lease is 12%.
5.	The initial direct costs are insignificant and assumed to be zero.
6.	The collectability of the rentals is reasonably assured.

Required:

1.	Next Level Assuming that the lease is a sales-type lease from Bernes point of view, calculate the selling price and assume that this is also the fair value.
2.	Prepare a table summarizing the lease receipts and interest income earned by Berne.
3.	Prepare journal entries for Berne, the lessor, for the years 2019 and 2020.

Assuming that the lease is a sales-type lease from Bernes point of view, calculate the selling price and assume that this is also the fair value.

Prepare a table summarizing the lease receipts and interest income earned by Berne.

Additional Instructions

Berne Company

Summary of Lease Payments Received and Interest Income Earned

1	Date	Annual Lease Payment Received	Interest Income at 12% on Receivable	Reduction of Lease Receivable	Lease Receivable
2	January 1, 2019
3	December 31, 2019
4	December 31, 2020
5	December 31, 2021
6	December 31, 2022

repare journal entries for Berne, the lessor, for the year 2019.

General Journal Instructions

PAGE 2019

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
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8

3b. Prepare journal entries for Berne, the lessor, for the year 2020.

PAGE 2020

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4