Josiah Leasing purchased equipment for $810,000 and leased it to Berretta Barbeque on January 1, 2016.

Other information:

Lease term 3 years

Annual payments $360,000 Jan.1, 2016, Dec. 31, 2016, Dec. 31, 2017

Life of asset 3 years

Implicit interest rate 8%

Lessees incremental rate 8%

Required:

1. Calculate the amount of selling profit that Josiah Leasing would recognize in this sales-type lease. Round to nearest dollar. Show calculations.

2. Prepare the appropriate entries for Josiah Leasing on January 1, 2016. Round to nearest dollar. Show calculations.

3. Prepare the appropriate entry for Josiah Leasing on December 31, 2016. Round to nearest dollar. Show calculations.

4. Prepare the appropriate entries for Berretta (lessee) on January 1, 2016 and December 31, 2016. Round to nearest dollar. Show calculations.