Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows:

1.	The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year.
2.	The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has a residual value of $20,000 which is guaranteed by Davis Company (the lessee).
3.	Davis agrees to pay all executory costs directly to a third party.
4.	The interest rate implicit in the lease is 14%.
5.	The initial direct costs are insignificant and assumed to be zero.
6.	It is probable that Edom will collect the lease payments.

Required:

1.	Next Level Assuming that the lease is a sales-type lease, calculate the selling price.
2.	Prepare a table summarizing the lease receipts and interest income earned by Edom.
3.	Prepare journal entries for Edom for the years 2019 and 2020.

. Assuming that the lease is a sales-type lease, calculate the selling price.

2. Prepare a table summarizing the lease receipts and interest income earned by Edom.

Additional Instructions

Edom Company

Summary of Lease Payments Received and Interest Income Earned

1	Date	Annual Lease Payments Received	Interest Income at 14% on Lease Receivable	Lease Receivable
2	January 1, 2019
3	January 1, 2019
4	December 31, 2019
5	January 1, 2020
6	December 31, 2020
7	January 1, 2021
8	December 31, 2021
9	January 1, 2022
10	December 31, 2022
11	January 1, 2023
12	December 31, 2023

Prepare journal entries for Edom for the year 2019.

General Journal Instructions

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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3b. Prepare journal entries for Edom for the year 2020.

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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