Questions #2- Lessor Accounting

Oakland Inc. signs a second contract with Ashton Ltd. on January 1, 2021 to lease equipment to Ashton. The following information relates to the agreement.

• The term of the non-cancellable lease is five years.
• The agreement requires equal annual rental payments from Ashton to Oakland beginning on January 1, 2021.
• The equipment has an estimated economic life of five years.
• The fair value of the equipment on January 1, 2021 is $100,000.
• At the end of the lease term, the asset is expected to have no residual value.
• The agreement requires equal annual rental payments from Ashton to Oakland beginning on January 1, 2021.
• The lessor's implicit rate is 8%.
• Oakland's annual accounting period ends on December 31

Instructions

1. Determine the annual rental payment.
2. Prepare an amortization schedule for Oakland for the lease.
3. Assume that Oakland the carrying value of the equipment at the commencement of the lease is $100,000, what kind of lease is it to Oakland? Why?
4. Prepare all of Oakland's journal entries for 2021 and 2022 to record the lease agreement, the lease payments received, assuming Oaklands carrying value of the equipment is $100,000.
5. Assume that Oakland the carrying value of the equipment at the commencement of the lease is $80,000, what kind of lease is it to Oakland? Why?
6. Prepare all of Oakland's journal entries for 2021 to record the lease agreement and the lease payments received, assuming Oaklands carrying value of the equipment is $80,000.