Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

	The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option.
	The annual rentals are $65,000, payable at the end of each year.
	The interest rate implicit in the lease is 15%.
	Darwin agrees to pay all executory costs.
	The cost and fair value of the equipment to the lessor is $308,021.03.
	The lessor incurs no material initial direct costs.
	The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.
	The lessor estimates that the fair value at the end of the lease term will be $50,000 and that the economic life of the equipment is 9 years.

The following present value factors are relevant:

	PVOAn=8,i=15% = 4.487322
	PVn=8,i=15% = 0.326902
	PVn=1,i=15% = 0.869565

Required:

1.	Prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this direct financing lease.
2.	State why the lease is a direct financing lease.
3.	Prepare journal entries for Calder for the years 2016, 2017, and 2018.
4.	Next Level Prepare partial balance sheets for December 31, 2016, and December 31, 2017, showing how the accounts should be reported. Use the present value of next years payment approach to classify the capital lease obligation. In addition, calculate how the accounts would be reported under the change in present value approach.

CALDER COMPANY

Lease Payments Received and Interest Revenue Earned Summary

2016 - 2023

1	Date	Interest Lease Payment Received	Revenue at 15% on Net Investment	Reduction of Net Investment	Lease Receivable	Unearned Interest: Leases	Net Investment
2	January 1, 2016
3	December 31, 2016
4	December 31, 2017
5	December 31, 2018
6	December 31, 2019
7	December 31, 2020
8	December 31, 2021
9	December 31, 2022
10	December 31, 2023

CALDER COMPANY

Balance Sheet (Partial)

1	Assets	December 31, 2017	December 31, 2016
2	Current Assets:
3	Net investment in direct financing leases
4	Noncurrent Assets:
5	Net investment in direct financing leases