Prepare the necessary journal entry for the company

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Question - Blossom Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $28,865 at the beginning of each year. The first payment is received on January 1, 2020. Blossom had purchased the machine during 2019 for $100,000. Collectibility of lease payments by Blossom is probable. Blossom set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Blossom at the termination of the lease.

Required -

Part 1 - Compute the amount of the lease receivable.

Part 2 - Prepare all necessary journal entries for Blossom for 2020.

Part 3 - Suppose the collectibility of the lease payments was not probable for Blossom. Prepare the necessary journal entry for the company in 2020.

Part 4 - Suppose at the end of the lease term, Blossom receives the asset and determines that it actually has a fair value of $900 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Blossom at the end of the lease term.

Reference no: EM133110135

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