The lease term is the contractual lease term modified by any renewal or termination options that are reasonably certain to be exercised or not exercised. Options whose exercise is under the control of the lessor are automatically included. Lease payments include payments resulting from those options as well as excess guaranteed residual values. The calculation of the present value of lease payments at the beginning of the lease does not include any variable lease payments, unless those payments are in-substance fixed payments or if they are based solely on an index or rate

On January 1, Year 1, Manlier Inc. leased equipment costing $45,000 to one of its customers. The sales-type lease agreement specifies six annual payments of $15,000 beginning on that date. The present value of the annual lease payments is $73,619. At the end of the lease, the equipment will be returned to Manlier and is expected to have a residual value of $5,000. The present value of that residual value is $2,822. Complete the appropriate journal entry recorded by Manlier at the beginning of the lease.

Record the entry at the beginning of the lease.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
01	Lease receivable