Recording Sales-Type Lease Journal Entries No Residual Value

Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $55,000 for the equipment in its inventory account. The lease commenced on January 1, 2020, with the first annual payment of $18,500 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $68,880, and no residual or salvage value. The implicit rate of the lease is 5% and collectability of the lease payments from Parker is probable. Record Franklins journal entries at the commencement of the sales-type lease.

• Note: Round your answers to the nearest whole dollar.
• Note: List multiple debits or credits (when applicable) in alphabetical order.

Dr. Cr. Date Account Name Jan. 1, 2020 Cost of Goods Sold Lease Receivable > 68,880 x O 0 O