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Exercise 21-06 Larkspur Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Crane 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. 2. 3. 4. Crane has the option to purchase the equipment for $21,000 upon termination of the lease. It is not reasonably certain that Crane will exercise this option. The equipment has a cost of $220,000 and fair value of $259,000 to Larkspur Leasing. The useful economic life is 2 years, with a residual value of $21,000. Larkspur Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Larkspur Leasing is probable. Click here to view factor tables. Prepare the journal entries on the books of Larkspur Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 - Lease Receivable 259,000 Cost of Goods Sold Sales Revenue Inventory 220,000 12/31/20 Cash Lease Receivable Interest Revenue 12/31/21 Cash Lease Receivable Interest Revenue Assuming that Crane exercises its option to purchase the equipment on December 31, 2021, prepare the journal entry to record the sale on Larkspur Leasing's books. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 12/31/21 Cash 21000 Lease Receivable 21000 Click if you would like to Show Work for this question: Open Show Work