Exercise 21-6

Pearl Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The lease is for an 8-year period and requires equal annual payments of $32,912 at the beginning of each year. The first payment is received on January 1, 2017. Pearl had purchased the machine during 2016 for $152,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Pearl. Pearl set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pearl at the termination of the lease.

Compute the amount of the lease receivable. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

The amount of the lease receivable.

Prepare all necessary journal entries for Pearl for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)