Question

The lease agreement and related facts indicate the following:

1. Leased equipment had a retail cash selling price of $370,000. Its useful life was six years with no residual value.
2. The lease term was six years and the lessor paid $300,000 to acquire the equipment (thus, selling profit).
3. Lessor’s implicit rate when calculating annual lease payments was 9%.
4. Annual lease payments beginning January 1, 2021, the beginning of the lease, were $75,670.
5. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction incurred by the lessor were $8,200.

Required:
1. & 2. Prepare the appropriate entries for the lessor to record the lease and the initial payment at its commencement and any entry(s) necessary at December 31, 2021, the fiscal year-end. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Journal entries:

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