Lessor Accounting with receipts at beginning of year

Edom Company, the lessor, enter into a lease with Davis Company to lease equipment to Davis beginning January 1, 2013. the lease terms , provisions, and related events are as follows:

1. The lease termis 5 years. The lease is non cancelable 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 ahs an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom.

3. Davis agrees to pay all executor costs.

4. The interest rate implicit in the lease is 14%.

5. The initial cost are insignificant and assured to be zero.

6. The collectability of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of un reimbursable costs yet to be incurred by the lessor.

1. Determine if the lease is a sales-type or direct financing lease from Edom's point of view.

2. Prepare a table summarizing the lease receipts and interest revenue earned by the lessor. Enter all amounts as positive numbers. If an amount is zero, enter "0". If required, round your answers to the nearest cent and use the rounded answersin subsequent computations.

Edom Company

Lease Payments Received and Interest Revenue Earned Summary

2013-2017 Lease Unearned Net

Annual Lease Interest RevenueReceivable InterestInvestment

Payments at 14% on NetLeases

Received

Jan. 1, 2013

Jan. 1, 2013

Dec. 31, 2013

Jan. 1, 2014

Dec. 31, 2014

Jan. 1, 2015 Received Investment

Dec. 31, 2015

Jan. 1, 2016

Dec . 31,2016

Jan. 1, 2017

Dec. 31, 2017

3. Prepare journal entries for Edom, The lessor, for the years 2013 and 2014. For compound entries, if an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.

Record LeaseLease Receivable

Cost of Asset Leased

Sales

Equipment

Unearned Interest:Leases

Jan. 1

Received Payment Cash

Lease Receivable

Dec. 31

InterestRevenue Unearned Interest:Leases

Interest revenue: Leases

2014

Jan.1Cash

Receive PaymentLease Receivable

Dec.31 Unearned Interest: Leases

Interest Revenue Interest revenue: Leases