Question
Splish Brothers Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Sunland Company. The term of the non-cancelable lease
Splish Brothers Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Sunland Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:
1. | Sunland has the option to purchase the equipment for $18,500 upon termination of the lease. It is not reasonably certain that Sunland will exercise this option. | |
2. | The equipment has a cost of $170,000 and fair value of $219,000 to Splish Brothers Leasing. The useful economic life is 2 years, with a residual value of $18,500. | |
3. | Splish Brothers Leasing desires to earn a return of 5% on its investment. | |
4. | Collectibility of the payments by Splish Brothers Leasing is probable. |
Assuming that Sunland exercises its option to purchase the equipment on December 31, 2021, prepare the journal entry to record the sale on Splish Brothers Leasings books. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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