Prepare the journal entries on the books of riverbed leasing

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On January 1, 2017 Riverbed Leasing Company leases computer hardware to Watson 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. Watson Company has the option to purchase the hardware for $12,000 upon termination of the lease.

2. The equipment has a cost and fair value of $107,000 to Riverbed Leasing Company. The useful economic life is 2 years, with a salvage value of $12,000.

3. Riverbed Leasing Company desires to earn a return of 8% on its investment.

4. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.

Question 1: Prepare the journal entries on the books of Riverbed Leasing to re?ect the payments received under the lease and to recognize income for the years 2017 and 2018.

Reference no: EM132586438

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