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Skysong Leasing Company signs a lease agreement on January 1,2025, to lease electronic equipment to...

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Accounting

Skysong Leasing Company signs a lease agreement on January 1,2025, to lease electronic equipment to Sheridan Company, The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. Sheridan has the option to purchase the equipment for \(\$ 23,500\) upon termination of the lease. It is not reasonably certain that Sheridan will exercise this option. 2. The equipment has a cost of \(\$ 270,000\) and fair value of \(\$ 322,000\) to Skysong Leasing. The Skysong Leasing desires to earn a return of \(5%\) on its investment. 4. Collectibility of the payments by Skysong Leasing is probable. (a) Prepare the joyrnal entries on the books of Skysong Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026.(b) Assuming that Sheridan exercises its option to purchase the equipment on December 31,2026, prepare the journal entry to record the sale on Skysong Leasing's books.

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