Terms of a lease agreement and related facts were:

1. The lease asset had a retail cash selling price of $132,000. Its useful life was six years with no residual value (straight-line depreciation).
2. Annual lease payments at the beginning of each year were $26,501, beginning January 1.
3. Lessors implicit rate when calculating annual rental payments was 8%.
4. Costs of $3,162 for legal fees for the lease execution were the responsibility of the lessor.

Required:

Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions:

1. The lease term is three years and the lessor paid $132,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $132,000 to acquire the asset. Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest to 7%. 3. The lease term is six years and the lessor paid $96,000 to acquire the asset.

View transaction list Journal entry worksheet 2 3 4 5 Record the gross lease revenue received by lessor. Note: Enter debits before credits. General Journal Debit Credit Date January 01 Record entry Clear entry View general journal View transaction list Journal entry worksheet Record the rent revenue for lessor. Note: Enter debits before credits. General Journal Debit Credit Date December 31 Record entry Clear entry View general journal Journal entry worksheet Journal entry worksheet