Castle Leasing Company signs a lease agreement on January 1, 2017, 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.

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 2017 and 2018. (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.)

Account Titles and Explanation Lease Receivable Cost of Goods Sold Date Debit Credit 160000 6000 Sales Revenue 6000 Inventory 120000 12/31/17-[cash 78244 Lease Receivable 70244 Interest Revenue [cash 8000 12/31/18 78244 Lease Receivable 73756 Interest Revenue 4488