Reference no: EM132419753

Problem: Sunland 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 $29,928 at the beginning of each year. The first payment is received on January 1, 2020. Sunland had purchased the machine during 2016 for $150,000. Collectibility of lease payments by Sunland is probable. Sunland 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 Sunland at the termination of the lease.

Required:

Question 1: What is the amount of the lease receivable? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)

Question 2: What are all necessary journal entries for Sunland for 2020? (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)

Question 3: Suppose the collectibility of the lease payments was not probable for Sunland. What is the necessary journal entry for the company in 2020? (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 4: Suppose at the end of the lease term, Sunland receives the asset and determines that it actually has a fair value of $940 instead of the anticipated residual value of $0. What is the entry to recognize the receipt of the asset for Sunland at the end of the lease term? (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)