Prepare the journal entries

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Question - The following facts pertain to a non-cancelable lease agreement between Tamarisk Leasing Company and Carla Vista Company, a lessee.

Commencement date May 1, 2020 Annual lease payment due at the beginning of each year, beginning with May 1, 2020 $19,656.69 Bargain purchase option price at end of lease term $7,000 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $65,000 Fair value of asset at May 1, 2020 $93,000 Lessor's implicit rate 6% Lessee's incremental borrowing rate 6%

The collectibility of the lease payments by Tamarisk is probable.

Required - Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2020 and 2021. The lessor's accounting period ends on December 31. Reversing entries are not used by Tamarisk.

Reference no: EM133030916

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