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 $500,000. 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 $500,000.4.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 10%.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. Assuming that the lease is a sales-type lease from Rexons point of view, calculate the amount of the equal rental receipts.

Additional Instruction

Rexon CompanySummary of Lease Payments Received and Interest Income Earned1DateAnnual Lease Payment ReceivedInterest Income at 10% on Net InvestmentReduction of Lease ReceivableLease Receivable2January 1, 2019 3December 31, 2019 4December 31, 2020 5December 31, 2021 6December 31, 2022 7December 31, 2023 8December 31, 2024 9December 31, 2025 10December 31, 2026

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General Journal

GENERAL JOURNAL

DATEACCOUNT TITLEPOST. REF.DEBITCREDIT1 2 3 4 5 6 7

3b. Prepare the journal entries for 2020.

PAGE 2020

GENERAL JOURNAL

DATEACCOUNT TITLEPOST. REF.DEBITCREDIT1 2 3