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Prepare the journal entries on the books of shamrock

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Shamrock Leasing Company signs a lease agreement on January 1, 2016, to lease electronic equipment to Pharoah Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year.

The following information relates to this agreement:

  1. Pharoah has the option to purchase the equipment for $23,000 upon termination of the lease. It is not reasonably certain that Pharoah will exercise this option.
  2. The equipment has a cost of $260,000 and fair value of $290,000 to Shamrock Leasing. The useful economic life is 2 years, with a residual value of $23,000.
  3. Shamrock Leasing desires to earn a return of 5% on its investment.
  4. Collectibility of the payments by Shamrock Leasing is probable.

problem 1: Prepare the journal entries on the books of Shamrock Leasing to reflect the payments received under the lease and to recognize income for the years 2016 and 2017.

Reference no: EM132785705

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