Question $8$ of $12$

$\frac{0\mathrm{.}5}{1}$

Larkspur Leasing Company signs a lease agreement on January $1,2025,$ to lease electronic equipment to Crane Company. The term of the non$-$cancelable lease is $2$ years, and payments are required at the end of each year. The following information relates to this agreement.

Crane has the option to purchase the equipment for $$21,000$ upon termination of the lease. It is not reasonably certain that Crane will exercise this option.

The equipment has a cost of $$220,000$ and fair value of $$259,000$ to Larkspur Leasing. The useful economic life is $2$ years, with a residual value of $$21,000.$

Larkspur Leasing desires to earn a return of $6\%$ on its investment.

Collectibility of the payments by Larkspur Leasing is probable.

Click here to view factor tables.

$($a$)$

Your answer is correct.

Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize income for the years $2025$ and $2026.($List all debit entries before credit entries. Credit, account titles are automatically indented when amount is entered. Do not indent manually. Lift all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places e$.$g$.5,275.)$

$\backslash$table$[[$sount Titles and Explanation,Debit,Credit$],[$ease Receivable,$259000,],[$ost of Goods Sold,$201310,],[$Sales Revenue,$2,240310],[$Inventory$,,220000],[,,],[$ash$,131074,],[$Lease Receivable,$2,115534],[$Interest Revenue,,$15540],[,2,],[$ash$,131074,$L$],[$Lease Receivable,,$122466],[0,,-],[$Interest Revenue,,$8608]]$

eTextbook and Media

List of Accounts

Attempts: $1$ of $3$ used

$($b$)$

Assuming that Crane exercises its option to purchase the equipment on December $31,2026,$ prepare the journal entry to record the sale on Larkspur Leasing's books. $($List debit entry before credit entry. 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.$)$

$\backslash$table$[[$Date$,$Account Titles and Explanation,Debit,Cri$],[\frac{12}{31}\frac{?}{26},,,]]$