Concord Company, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1, 2017. The lease is for a 7-year period and requires equal annual payments of $26,143 at the beginning of each year. The first payment is received on January 1, 2017.
Concord had purchased the machine during 2016 for $75,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Concord. Concord set the annual rental to ensure an 8% rate of return.
The machine has an economic life of 8 years with no residual value and reverts to Concord at the termination of the lease.
Required:
1. Compute the amount of the lease receivable. (Round present value factor calculations to 5 decimal places, e. g. 1.25124 and the final answer to 0 decimal places e. g. 58,971.)
2. Prepare all necessary journal entries for Headland for 2017. (Round answers to decimal places e. g. 5,125.)
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Concord Company, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1...
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