On January 1, 2013, Ballieu Company leases specialty equipment with an economic

Question

On January 1, 2013, Ballieu Company leases specialty equipment with an economic life of 12 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 12 years. The annual rentals are $34,600, payable at the beginning of each year. The interest rate implicit in the lease is 10%. Anderson agrees to pay all executory costs and is given an option to buy the equipment for $1 at the end of the lease term. The cost of the equipment to the lessor is $225,000, and the fair retail value is approximately $259,300. The lessor incurs no material initial direct costs. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. The lessor estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. The lessor calculates that the present value on January 1, 2013 of 12 annual payments in advance of $34,600 discounted at 10% is $259,329.11 (the $1 purchase option is ignored as immaterial).

Prepare all the journal entries for Ballieu for the years 2013 and 2014. I've prepared the spreadsheet and only need the answer to the ones that are marked with ? Thank you!

2013 Jan 1 Record Lease: Lease Receivable 415,200

2013 Jan 1 Record Lease: Sales ?

2013 Jan 1 Record Lease: Unearned Interest Leases 155,870.89

Cost: Cost of Asset Leased ?

Cost: Specialty Equpment (Inventory) ?

Payment: Cash 34,600

Payment: Lease Recivable ?

Dec 31 Interest Revenue: Unearned Interest Leases ?

Dec 31 Interest Revenue: Interest Revenue Leases ?

2014 Jan 1 Collect Payment: Cash 34,600

2014 Jan 1 Collect Payment: Lease Receivable ?

Dec 31 Interest Revenues: Unearned Interest Leases ?

Dec 31 Interest Revenues: Leases ?

Explanation / Answer

Sales = $259,329.11

Cost of Asset Leased = $259,300

Specialty Equipment (Invetory) = $225,000

Payment Lease Recivable = $34,600

Interest Revenue: Unearned Interest Leases = $31,46 (34,600 * 10 / 110)

Interest Revenue: Interest Revenue Leases = $31,46 (34,600 * 10 / 110)

Collect Payment: Lease Receivable = $224,729

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