Accounting entries to be recorded by lessor on transaction

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Reference no: EM131212928

The cost of the equipment manufactured by Solitaire is $120,000 and the fair value is $190,008.49.

Solitaire incurred initial direct costs of $50,000 associated with putting the lease deal together.

The term of the lease is 10 years with annual payments of $30,000 received at the beginning of each year. The estimated economic life of the asset is 12 years.

The lessee is given the option to purchase the asset for $5,000 at the end of the lease term. This is a bargain purchase price.

The lessor’s implicit interest rate is 12%.

The collectability of the payments is reasonably assured and there are no uncertainties involve din the lease.

Required:

Prepare all the necessary accounting entries to be recorded by the lessor on this transaction for 2016 and 2017.

Reference no: EM131212928

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