Marin Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $287,996, and its unguaranteed residual value at the end of the lease term is estimated to be $21,200. National will pay annual payments of $41,400 at the beginning of each year. Marin incurred costs of $163,500 in manufacturing the equipment and $3,800 in sales commissions in closing the lease. Marin has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%.

Discuss the nature of this lease in relation to the lessor. This is a

a) operating lease

b) sales-type lease

C) finance lease. Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 5,275.)

(1)		Lease receivable		$
(2)		Sales price		$
(3)		Cost of sales		$

Prepare a 10-year lease amortization schedule for Marin, the lessor. (Round answers to 0 decimal places e.g. 5,275.)

MARIN COMPANY (Lessor) Lease Amortization Schedule Annuity Due Basis, Unguaranteed Residual Value
Beginning of Year		Annual Lease Payment Plus Residual Value		Interest on Lease Receivable		Lease Receivable Recovery		Lease Receivable
Initial PV		$		$		$		$
1
2
3
4
5
6
7
8
9
10
End of 10
		$		$		$

Prepare all of the lessors journal entries for the first year. (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. 5,275.)

Account Titles and Explanation	Debit	Credit
(To record the sale and the cost of goods sold in the lease transaction.)
(To record payment of the initial direct costs relating to the lease.)
(To record receipt of the first lease payment.)
(To record interest earned during the first year of the lease.)