Sunland Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $505,837, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,700. The hospital will pay rents of $61,200 at the beginning of each year. Sunland incurred costs of $255,000 in manufacturing the machine and $14,500 in legal fees directly related to the signing of the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%

Compute the amount of each of the following items.

(1)		Lease receivable at commencement of the lease		$
(2)		Sales price		$
(3)		Cost of sales		$

Prepare a 10-year lease amortization schedule for Sunland, the lessor.

SUNLAND INC. (Lessor) Lease Amortization Schedule (Annuity due basis, guaranteed residual value)
Beginning of Year		Annual Lease Payment Plus Residual Value		Interest on Lease Receivable		Recovery of Lease Receivable		Lease Receivable
Initial PV		$		$		$		$
1
2
3
4
5
6
7
8
9
10
End of 10
		$		$		$

Prepare all of the lessors journal entries for the first year.

No.	Account Titles and Explanation	Debit	Credit
1.
	(To record the lease.)
	(To record direct costs incurred on account.)
2.
	(To record receipt of the first lease payment.)
3.
	(To record interest earned during the first year of the lease.)