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Washington Financing Inc. purchased a packing machine to lease to Puyallup fruits. The lease qualifies as a direct financing lease and requires lease payments of
Washington Financing Inc. purchased a packing machine to lease to Puyallup fruits. The lease qualifies as a direct financing lease and requires lease payments of $80,000 per year, payable in advance, over a five-year period. The expected residual value at the end of the lease is $100,000. Washington's implicit interest rate(known to Puyallup) is 11 percent. The lease term begins on january 1, 2011. The lease meets the capital lease criteria for Puyallup. *Provide the journal entries required on both Washington's and puyallup's books when the lease expires, assuming that the residual value is guaranteed and the fair value of the packing machine is $55,000 on December 31, 2015
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