On January $1,$ Year $1,$ Grandioso Co$.,$ lessor, leased equipment to Explicit, Inc., lessee, for $3$ annual payments of $$50,000$ starting on December $31,$ Year $1.$ The equipment's remaining useful life is $5$ years. At the inception of the lease, the fair value of the equipment is $$132,000,$ and the carrying amount of the equipment is $$110,000.$ The lease is classified as a sales$-$type lease. The rate implicit in the lease is $4\%.$

Present value of $$1$ at $4\%$ for $3$ periods $0\mathrm{.}889$

Present value of $$1$ at $4\%$ for $5$ periods $0\mathrm{.}822$

Present value of an annuity of $$1$ at $4\%$ for $3$ periods $2\mathrm{.}7751$

Present value of an annuity of $$1$ at $4\%$ for $5$ periods $4\mathrm{.}4518$

Using the given information, prepare the journal entries for Grandioso for each year of the lease. Enter all values as positive numbers. Round each number to the nearest whole number $($$$0\mathrm{.}50$ rounds up to $$1).$

Task $1$

Calculate the present value of the payments for the leased equipment, and record the journal entry for Grandioso $($lessor$)$ at lease commencement on January $1,$ Year $1.$

No Entry Required

Account

Debit

Credit

Net investment in the lease

$$139,255$

Cost of goods sold

$$110,000$

Revenue

$$132,000$

Equipment

$$110,000$

Task $2$

Record the journal entry at $12/31/$Year $1$ when the first lease payment is received. What is the net investment in the lease balance after the first lease payment?

No Entry Required

Account

Debit

Credit

Cash

$$50,000$

Interest income

$$5,570$

Net investment in the lease

$$44,430$

Balance

Amount

Net investment in the lease balance

Task $3$

Record the journal entry at $12/31/$Year $2$ when the second lease payment is received. What is the net investment balance after the second lease payment?

No Entry Required

Account

Debit

Credit

Cash

$$50,000$

Interest income

$$4,777$

Net investment in the lease

$$45,233$

Balance

Amount

Net investment in the lease balance

$$45,233$

Task $4$

Record the journal entry at $12/31/$Year $3$ when the third lease payment is received. What is the net investment balance after the third lease payment?

No Entry Required

Account

Debit

Credit

Cash

$$50,000$

Interest income

$$3,989$

Net investment in the lease

$$46,011$

Balance

Amount

Net investment in the lease balance

$$46,011$