Reference no: EM132431226
Question - Blossom Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Blue Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:
1. Blue Company has the option to purchase the equipment for $15,800 upon termination of the lease.
2. The equipment has a cost and fair value of $150,000 to Blossom Leasing Company. The useful economic life is 2 years, with a salvage value of $15,800.
3. Blue Company is required to pay $5,000 each year to the lessor for executory costs.
4. Blossom Leasing Company desires to earn a return of 10% on its investment.
5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
How to prepare the journal entries on the books of Blossom Leasing to reflect the payments received under the lease and to recognize income for the years 2017 and 2018?
How do you solve for cash, lease receivable and interest revenue?
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