Recording Sales-Type Lease, Unguaranteed Residual ValueLessor

Flint Company leased equipment to Land Company for a ve-year period. Flint paid $140,895 for the equipment, which equals its current carrying value (with estimated useful life of ve years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The rst payment was received on January 1 of Year 1, and Flints accounting periods end on December 31. The equipment reverts to Flint at the end of the lease term, at which time Flint estimates that the equipment will have an unguaranteed residual value of $6,000. Hint: Underlying assets carrying value equals its fair value at lease commencement.

a. Compute the annual payment calculated by the lessor.

b. Prepare a schedule of the lease receivable for the lessor for the full lease term.

c. Provide journal entries for Year 1 and Year 2 for the lessor assuming that the equipment is held in the lessors Inventory account.

d. Record the entry on December 31 of Year 5 for the return of the equipment assuming the equipment had a fair value of $6,000.

b. Prepare a schedule of the lease receivable for the lessor for the full lease term. - Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. c. Provide journal entries for Year 1 and Year 2 for the lessor assuming that the equipment is held in the lessor's Inventory account. - Note: Round your answers to the nearest whole dollar. d. Record the entry on December 31 of Year 5 for the return of the equipment assuming the equipment had a fair value of $6,000