Castle Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Jan Way Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:

1.		Jan Way has the option to purchase the equipment for $16,000 upon termination of the lease. It is not reasonably certain that Jan Way will exercise this option.
2.		The equipment has a cost of $120,000 and fair value of $160,000 to Castle Leasing. The useful economic life is 2 years, with a residual value of $16,000.
3.		Castle Leasing desires to earn a return of 5% on its investment.
4.		Collectibility of the payments by Castle Leasing is probable.

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(a)

Your answer is correct.

Prepare the journal entries on the books of Castle Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. (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 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/2012/31/21Correct answer	enter an account title for the journal entry on January 1 2020Correct answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account title for the journal entry on January 1 2020Correct answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account title for the journal entry on January 1 2020Correct answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account title for the journal entry on January 1 2020Correct answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
1/1/2012/31/2012/31/21Correct answer	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
1/1/2012/31/2012/31/21Correct answer	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer
	enter an account titleCorrect answer	enter a debit amountCorrect answer	enter a credit amountCorrect answer

eTextbook and Media

List of Accounts

Attempts: 1 of 10 used

(b)

Assuming that Jan Way exercises its option to purchase the equipment on December 31, 2021, prepare the journal entry to record the sale on Castle Leasings books. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
12/31/21	enter an account title for the journal entry on December 31 2021	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31 2021	enter a debit amount	enter a credit amount

Prepare thejournal entries on the boole of Castle Leasing to reflect the payments received under the lease and to recognize incoma for the years 2020 and 2021 . (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 0 decimal places e.s. 5275. eTextbook and Medls Attempts: 1 of 10 used (b) Assuming that Jan Way evercises its option to purchase tha aquipmant on December 31,2021 , prepare thejournal antry to record the sala on Castla Leasing's books. (Credit account titles are automatically indented when amount is entered. Do not indent manualke]