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Recording Sales-Type Lease Journal Entries-No Residual Value Franklin Co. leased its manufactured equipment...

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Accounting

Recording Sales-Type Lease Journal Entries-No Residual Value
Franklin Co. leased its manufactured equipment to Parker Inc. for a four-year term. Franklin Co. reported a book value of $55,000 for the equipment in its inventory account. The lease commenced on January 1 with the first annual payment of $18,500 due immediately. The equipment has a useful life of four years, an estimated fair value of $68,880, and no residual or salvage value. The implicit rate of the lease is 5% and collectibility of the lease payments from Parker is probable.
Record Franklin's journal entries at the commencement of the sales-type lease for the (1) lease receivable and (2) receipt of the first payment.
Note: Round your answers to the nearest whole dollar.
\table[[Date,Account Name,Dr.,Cr.],[1) Jan. 1,Lease Receivable,68,880,0],[Cost of Goods Sold,55,000,0],[Sales Revenue,0,68,880],[Inventory,0,55,000],[To derecognize asset and record investment in lease,,],[2) Jan. 1,Cash,50,380,0],[Lease Receivable,0,36,500],[To record cash lease payment,,]]
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