Exercise 21-11 (Part Level Submission)

The following facts pertain to a non-cancelable lease agreement between Kingbird Leasing Company and Blossom Company, a lessee.

Commencement date		May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020		$15,138.16
Bargain purchase option price at end of lease term		$4,000
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$50,000
Fair value of asset at May 1, 2020		$68,000
Lessors implicit rate		8	%
Lessees incremental borrowing rate		8	%

The collectibility of the lease payments by Kingbird is probable.

a.

Compute the amount of the lease receivable at commencement of the lease.

b.

Prepare a lease amortization schedule for Mooney for the 5-year lease term.

c.

Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2020 and 2021. The lessor's accounting period ends on December 31. Reversing entries are not used by Mooney.

d.

Suppose the collectibility of the lease payments was not probable for Mooney. Prepare all necessary journal entries for the company in 2020.