Problem 2

On Jan 1, 20x1, Panda Yummy entered into an agreement to lease packaging equipment from RCT financing. The lease was for 6 years, commencing immediately on January 1, 20x1. Under the agreement , Panda Yummy would make a lease payment of $24,000 at the beginning of each of the 6 years. The equipment was expected to have an economic life of 10 years.

Under the agreement, Panda Yummy had the option of purchasing the packaging equipment for $2,000 at the end of the lease term, when the equipment was expected to be worth $8,000. The lessors rate of return on the leasing arrangement was 7%

Panda Yummy had a year-end of Dec 31.

Required

1. Prepare an amortization table for Panda Yummy for the lease.

1. Prepare all Journal entries for 20x1 and 20X2
2. Prepare the journal entries that Panda Yummy would make when exercising the bargain purchase option at the end of the lease term.