Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. 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 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. | The equipment has a fair value of $700,000. |
| 4. | Ten-Care agrees to pay all executory costs directly to a third party. |
| 5. | The lease contains no renewal or bargain purchase option. |
| 6. | The interest rate implicit in the lease is 12%. |
| 7. | The initial direct costs are insignificant and assumed to be zero. |
| 8. | It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. |
Required:
| 1. | Next Level Assuming that the lease is a sales-type lease from Rexons point of view, calculate the amount of the equal rental receipts. |
| 2. | Prepare a table summarizing the lease receipts and interest income earned by Rexon. |
| 3. | Prepare journal entries for Rexon for the years 2019 and 2020. |
1 0.985222 0.961538 0.956938 0.952381 0.947867 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.847458 2 1.955883 1.886095 1.872668 1.859410 1.846320 1.833393 1.808018 1.783265 1.759111 1.735537 1.690051 1.646661 1.605232 1.565642 3 2.912200 2.775091 2.748964 2.723248 2.697933 2.673012 2.624316 2.577097 2.531295 2.486852 2.401831 2.321632 2.245890 2.174273 4 3.854385 3.629895 3.587526 3.545951 3.505150 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.690062 5 4.782645 4.451822 4.389977 4.329477 4.270284 4.212364 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 3.127171 6 5.697187 5.242137 5.157872 5.075692 4.995530 4.917324 4.766540 4.622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.497603 7 6.598214 6.002055 5.892701 5.786373 5.682967 5.582381 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.811528 8 7.485925 6.732745 6.595886 6.463213 6.334566 6.209794 5.971299 5.746639 5.534819 5.334926 4.967640 4.638864 4.343591 4.077566 9 8.360517 7.435332 7.268790 7.107822 6.952195 6.801692 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.303022 10 9.222185 8.110896 7.912718 7.721735 7.537626 7.360087 7.023582 6.710081 6.417658 6.144567 5.650223 5.216116 4.833227 4.494086 11 10.071118 8.760477 8.528917 8.306414 8.092536 7.886875 7.498674 7.138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.656005 12 10.907505 9.385074 9.118581 8.863252 8.618518 8.383844 7.942686 7.536078 7.160725 6.813692 6.194374 5.660292 5.197107 4.793225 13 11.731532 9.985648 9.682852 9.393573 9.117079 8.852683 8.357651 7.903776 7.486904 7.103356 6.423548 5.842362 5.342334 4.909513 14 12.543382 10.563123 10.222825 9.898641 9.589648 9.294984 8.745468 8.244237 7.786150 7.366687 6.628168 6.002072 5.467529 5.008062 15 13.343233 11.118387 10.739546 10.379658 10.037581 9.712249 9.107914 8.559479 8.060688 7.606080 6.810864 6.142168 5.575456 5.091578 16 14.131264 11.652296 11.234015 10.837770 10.462162 10.105895 9.446649 8.851369 8.312558 7.823709 6.973986 6.265060 5.668497 5.162354 17 14.907649 12.165669 11.707191 11.274066 10.864609 10.477260 9.763223 9.121638 8.543631 8.021553 7.119630 6.372859 5.748704 5.222334 18 15.672561 12.659297 12.159992 11.689587 11.246074 10.827603 10.059087 9.371887 8.755625 8.201712 7.249670 6.467420 5.817848 5.273164 19 16.426168 13.133939 12.593294 12.085321 11.607654 11.158116 10.335595 9.603599 8.950115 8.364920 7.365777 6.550369 5.877455 5.316241 20 17.168639 13.590326 13.007936 12.462210 11.950382 11.469921 10.594014 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 5.352746 21 17.900137 14.029160 13.404724 12.821153 12.275244 11.764077 10.835527 10.016803 9.292244 8.648694 7.562006 6.686957 5.973139 5.383683 22 18.620824 14.451115 13.784425 13.163003 12.583170 12.041582 11.061240 10.201044 9.442425 8.771540 7.644646 6.742944 6.011326 5.409901 23 19.330861 14.856842 14.147775 13.488574 12.875042 12.303379 11.272187 10.371059 9.580207 8.883218 7.718434 6.792056 6.044247 5.432120 24 20.030405 15.246963 14.495478 13.798642 13.151699 12.550358 11.469334 10.528758 9.706612 8.984744 7.784316 6.835137 6.072627 5.450949 25 20.719611 15.622080 14.828209 14.093945 13.413933 12.783356 11.653583 10.674776 9.822580 9.077040 7.843139 6.872927 6.097092 5.466906 26 21.398632 15.982769 15.146611 14.375185 13.662495 13.003166 11.825779 10.809978 9.928972 9.160945 7.895660 6.906077 6.118183 5.480429 27 22.067617 16.329586 15.451303 14.643034 13.898100 13.210534 11.986709 10.935165 10.026580 9.237223 7.942554 6.935155 6.136364 5.491889 28 22.726717 16.663063 15.742874 14.898127 14.121422 13.406164 12.137111 11.051078 10.116128 9.306567 7.984423 6.960662 6.152038 5.501601 29 23.376076 16.983715 16.021889 15.141074 14.333101 13.590721 12.277674 11.158406 10.198283 9.369606 8.021806 6.983037 6.165550 5.509831 30 24.015838 17.292033 16.288889 15.372451 14.533745 13.764831 12.409041 11.257783 10.273654 9.426914 8.055184 7.002664 6.177198 5.516806 1 0.985222 0.961538 0.956938 0.952381 0.947867 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.847458 2 1.955883 1.886095 1.872668 1.859410 1.846320 1.833393 1.808018 1.783265 1.759111 1.735537 1.690051 1.646661 1.605232 1.565642 3 2.912200 2.775091 2.748964 2.723248 2.697933 2.673012 2.624316 2.577097 2.531295 2.486852 2.401831 2.321632 2.245890 2.174273 4 3.854385 3.629895 3.587526 3.545951 3.505150 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.690062 5 4.782645 4.451822 4.389977 4.329477 4.270284 4.212364 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 3.127171 6 5.697187 5.242137 5.157872 5.075692 4.995530 4.917324 4.766540 4.622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.497603 7 6.598214 6.002055 5.892701 5.786373 5.682967 5.582381 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.811528 8 7.485925 6.732745 6.595886 6.463213 6.334566 6.209794 5.971299 5.746639 5.534819 5.334926 4.967640 4.638864 4.343591 4.077566 9 8.360517 7.435332 7.268790 7.107822 6.952195 6.801692 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.303022 10 9.222185 8.110896 7.912718 7.721735 7.537626 7.360087 7.023582 6.710081 6.417658 6.144567 5.650223 5.216116 4.833227 4.494086 11 10.071118 8.760477 8.528917 8.306414 8.092536 7.886875 7.498674 7.138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.656005 12 10.907505 9.385074 9.118581 8.863252 8.618518 8.383844 7.942686 7.536078 7.160725 6.813692 6.194374 5.660292 5.197107 4.793225 13 11.731532 9.985648 9.682852 9.393573 9.117079 8.852683 8.357651 7.903776 7.486904 7.103356 6.423548 5.842362 5.342334 4.909513 14 12.543382 10.563123 10.222825 9.898641 9.589648 9.294984 8.745468 8.244237 7.786150 7.366687 6.628168 6.002072 5.467529 5.008062 15 13.343233 11.118387 10.739546 10.379658 10.037581 9.712249 9.107914 8.559479 8.060688 7.606080 6.810864 6.142168 5.575456 5.091578 16 14.131264 11.652296 11.234015 10.837770 10.462162 10.105895 9.446649 8.851369 8.312558 7.823709 6.973986 6.265060 5.668497 5.162354 17 14.907649 12.165669 11.707191 11.274066 10.864609 10.477260 9.763223 9.121638 8.543631 8.021553 7.119630 6.372859 5.748704 5.222334 18 15.672561 12.659297 12.159992 11.689587 11.246074 10.827603 10.059087 9.371887 8.755625 8.201712 7.249670 6.467420 5.817848 5.273164 19 16.426168 13.133939 12.593294 12.085321 11.607654 11.158116 10.335595 9.603599 8.950115 8.364920 7.365777 6.550369 5.877455 5.316241 20 17.168639 13.590326 13.007936 12.462210 11.950382 11.469921 10.594014 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 5.352746 21 17.900137 14.029160 13.404724 12.821153 12.275244 11.764077 10.835527 10.016803 9.292244 8.648694 7.562006 6.686957 5.973139 5.383683 22 18.620824 14.451115 13.784425 13.163003 12.583170 12.041582 11.061240 10.201044 9.442425 8.771540 7.644646 6.742944 6.011326 5.409901 23 19.330861 14.856842 14.147775 13.488574 12.875042 12.303379 11.272187 10.371059 9.580207 8.883218 7.718434 6.792056 6.044247 5.432120 24 20.030405 15.246963 14.495478 13.798642 13.151699 12.550358 11.469334 10.528758 9.706612 8.984744 7.784316 6.835137 6.072627 5.450949 25 20.719611 15.622080 14.828209 14.093945 13.413933 12.783356 11.653583 10.674776 9.822580 9.077040 7.843139 6.872927 6.097092 5.466906 26 21.398632 15.982769 15.146611 14.375185 13.662495 13.003166 11.825779 10.809978 9.928972 9.160945 7.895660 6.906077 6.118183 5.480429 27 22.067617 16.329586 15.451303 14.643034 13.898100 13.210534 11.986709 10.935165 10.026580 9.237223 7.942554 6.935155 6.136364 5.491889 28 22.726717 16.663063 15.742874 14.898127 14.121422 13.406164 12.137111 11.051078 10.116128 9.306567 7.984423 6.960662 6.152038 5.501601 29 23.376076 16.983715 16.021889 15.141074 14.333101 13.590721 12.277674 11.158406 10.198283 9.369606 8.021806 6.983037 6.165550 5.509831 30 24.015838 17.292033 16.288889 15.372451 14.533745 13.764831 12.409041 11.257783 10.273654 9.426914 8.055184 7.002664 6.177198 5.516806
