Delaney Customizing Limited (DCL), a December 31 year-end public company, manufactures specialized machinery for light manufacturing companies in and around Vancouver.DCL normally sells this equipment outright but is developing leases to customers as a means of expanding business.

DCL has just finalized the following lease to a client, Lost Lagoon Limited, for specialized equipment. The terms are as follows:

Lease term: 5 years; annual payments at anniversary date

Estimated useful life: 8 years

Lease start date: June 1, 2018

Bargain Purchase Option at the end of the lease term: $88,000.

Rate of return priced into the lease by DCL: 5%

Normal selling price of the equipment: $415,000

Manufactured cost to DCL: $350,000

Insurance policy covering the equipment at an annual cost of $3,600, payable at the beginning of each lease year. DCL records these receipts from multiple clients to an insurance expense recovery (credit) account.

Record the entries, with supporting calculations, on the following dates:

June 1, 2018 and December 31, 2018.

Prepare a partial balance sheet presentation, in good form, of DCL as at December 31, 2018 arising from entering into this lease. Show supporting computations where required.