Morgan Leasing Company signs an agreement on January 1, 2014, to lease equipment to Cole Company. The following information relates to this agreement.

1.The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2.The cost of the asset to the lessor is $243,000. The fair value of the asset at January 1, 2014, is $243,000. 3.The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $53,320, none of which is guaranteed. 4.Cole Company assumes direct responsibility for all executory costs. 5.The agreement requires equal annual rental payments, beginning on January 1, 2014. 6.Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.

Assuming the lessor desires a 10% rate of return on its investment, calculate the amount of the annual rental payment required. (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 annual rental payment

$ ?

Prepare an amortization schedule that would be suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 58,971.)

Prepare all of the journal entries for the lessor for 2014 and 2015 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume the lessors annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

TABLE 6-2 PRESENT VALUE OF 12% 92593 86957 75614 91743 79719 .77218 63552 56743 49718 63017 58349 54027 50025 .56447 .51316 48166 .50187 32197 28748 22917 42241 35218 42888 39711 31728 21494 31863 32618 23199 31524 27454 21763 19785 29189 27027 25025 23171 10687 14564 11611 17843 06110 19866 10067 07379 04017 12641 11597 08170 07361 08831 05974 04187 03738 01997 01737 01510 04849 .05731 06915 05210 04736 03194 02878 07889 .03914 06763 01894 00751 02104 01896 01708 01538 01691 01510 01348 01204 01075 05799 02674 02430 02210 00494 04971