Rexon Company leases equipment to Ten-Care Company beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

1.	The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year.
2.	The cost, and also fair value, of the equipment is $700,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time.
3.	Ten-Care agrees to pay all executory costs.
4.	The lease contains no renewal or bargain purchase option.
5.	The interest rate implicit in the lease is 12%.
6.	The initial direct costs are insignificant and assumed to be zero.
7.	The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.

Required:

1.	Next Level Assuming that the lease is a direct financing lease from Rexons point of view, calculate the amount of the equal rental receipts.
2.	Prepare a table summarizing the lease receipts and interest revenue earned by Rexon.
3.	Prepare journal entries for Rexon for the years 2016 and 2017.

CHART OF ACCOUNTS

Rexon Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
122	Lease Receivable
141	Inventory
152	Prepaid Insurance

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Interest: Leases
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Revenue: Leases

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Assuming that the lease is a direct financing lease from Rexons point of view, calculate the amount of the equal rental receipts. Additional Instruction

Prepare a table summarizing the lease receipts and interest revenue earned by Rexon. Additional Instructions

REXON COMPANY

Lease Payments Received and Interest Revenue Earned Summary

2016 - 2023

1	Date	Annual Lease Payment Received	Interest Revenue at 12% on Net Investment	Amount of Net Investment Recovered	Lease Receivable	Unearned Interest: Leases	Net Investment
2	January 1, 2016
3	December 31, 2016
4	December 31, 2017
5	December 31, 2018
6	December 31, 2019
7	December 31, 2020
8	December 31, 2021
9	December 31, 2022
10	December 31, 2023

Prepare journal entries for Rexon for the years 2016 and 2017. Additional Instructions

PAGE 2016PAGE 2017

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7