Business, 17.12.2019 03:31, krystalhurst97
Castle leasing company signs a lease agreement on january 1, 2014 to lease electronic equipment to jan way company. the term of teh nonconcealable lease is 2 years and payments are required at the end of each year. the following information relates to the agreement:
1. jan way has the option to purchase the equipment for $16,000 upon termination of the lease.
2. the equipment has a cost and fair value of $160,000 to castle leasing company. the useful economic life is 2 years, with a salvage value of $16,000.
3.jan way company is required to pay $5000 each year to the lessor for executory costs.
4. castle leasing company desires to earn a return of 10% on its investment.
5. collectibility of the payments is reasonably predictible, and there are no important uncertianties surrounding the costs yet to be incurred by the lessor.
directions:
a) prepare the journal entries on the books of castle leasing to reflect the payments received under the ease and to recognize income for the years 2014 and 2015:
1/1/14
12/31/14
12/31/15
b) assuming that jan way company exercises its option to purchase the equipment on december 31, 2015, prepare the journal entry to reflect the sale on castle's books.
Answers: 1
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