Facts for Questions 34 through 41 On December 31, 2020, Henry Calvin Co. (Lessor) leased equipment to Andrew James Inc. (Lessee) with a lease term of 8 years. The 1st lease payment of $675,000 was made on December 31, 2020, the lease commencement date. The present value of the future lease payments is $3,960,000. The cost of the equipment to Henry Calvin Co. was $3,600,000. The Lessor classified the lease as a sales-type lease, with selling profit. The Lessor's implicit interest rate and the Lessee's incremental borrowing rate are both 10%. 34. How did Andrew James Inc., the Lessee, classify the lease? 35. What is the Lessee's Journal Entry when they entered into the lease? 36. What is the total amount of income, if any, that Henry Calvin Co., the Lessor, will recognize in 2021? 37. What Journal Entry(s), if any, did Henry Calvin Co., the Lessor, record upon entry into the lease? 38. What is the Lessee's, Andrew James Inc., Journal Entry to record the 1st rental payment that they made on the lease commencement date? 39. What is the Lessor's, Henry Calvin Co., Journal Entry to record the 1st rental payment that they received on the lease commencement date? 40. What is the Lessee's, Andrew James Inc., Journal Entry to record the 2nd rental payment that they made on December 31, 2021? 41. What is the Lessor's, Henry Calvin Co., Journal Entry to record the 2nd rental payment that they received on December 31, 2021? Facts for Questions 34 through 41 On December 31, 2020, Henry Calvin Co. (Lessor) leased equipment to Andrew James Inc. (Lessee) with a lease term of 8 years. The 1st lease payment of $675,000 was made on December 31, 2020, the lease commencement date. The present value of the future lease payments is $3,960,000. The cost of the equipment to Henry Calvin Co. was $3,600,000. The Lessor classified the lease as a sales-type lease, with selling profit. The Lessor's implicit interest rate and the Lessee's incremental borrowing rate are both 10%. 34. How did Andrew James Inc., the Lessee, classify the lease? 35. What is the Lessee's Journal Entry when they entered into the lease? 36. What is the total amount of income, if any, that Henry Calvin Co., the Lessor, will recognize in 2021? 37. What Journal Entry(s), if any, did Henry Calvin Co., the Lessor, record upon entry into the lease? 38. What is the Lessee's, Andrew James Inc., Journal Entry to record the 1st rental payment that they made on the lease commencement date? 39. What is the Lessor's, Henry Calvin Co., Journal Entry to record the 1st rental payment that they received on the lease commencement date? 40. What is the Lessee's, Andrew James Inc., Journal Entry to record the 2nd rental payment that they made on December 31, 2021? 41. What is the Lessor's, Henry Calvin Co., Journal Entry to record the 2nd rental payment that they received on December 31, 2021
