Business, 18.03.2021 01:20 amiahmiller79
On January 1, 2017 Marigold Leasing Company leases computer hardware to Watson Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:
1. Watson Company has the option to purchase the hardware for $12,000 upon termination of the lease.
2. The equipment has a cost and fair value of $100,000 to Marigold Leasing Company. The useful economic life is 2 years, with a salvage value of $12,000.
3. Marigold Leasing Company desires to earn a return of 9% on its investment.
4. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
1. Prepare the journal entries on the books of Crane Leasing to reflect the payments received under the lease and to recognize income for the years 2017 and 2018.
2. Assuming that Watson Company exercises its option to purchase the equipment on December 31, 2018, prepare the journal entry to reflect the sale on Crane' books.
Answers: 3
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On January 1, 2017 Marigold Leasing Company leases computer hardware to Watson Company. The term of...
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