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Blue Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $42,200 each, beginning December 31, 2019.

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Blue Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $42,200 each, beginning December 31, 2019. In addition, Blue guarantees the lessor a residual value of $19,500 at the end of the lease. However, Blue believes it is probable that the expected residual value at the end of the lease term will be $9,500. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $160,000. Prepare Lost Ark's 2019 and 2020 journal entries, assuming the implicit rate of the lease is 10% and this is known to Blue. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. e Account Titles and Explanation Debit Credit 2019 Lease Receivable 74760 Cost of Goods Sold 160000 Sales Revenue 74760 Inventory 160000 (To record the lease) 2019 Cash 42200 HOE DINE Lease Receivable 42200 (To record receipt of lease payment) 2020 V leaser 214279 Gain on Disposal of Equipment 54279 Equipment 160000

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