| On January 2, 2013, Bentley Co. leases equipment from Harry’s Leasing Company with five equal annual payments of $120,000 each, payable beginning December 31, 2013. Bentley Co. agrees to guarantee the $20,000 residual value of the asset at the end of the lease term. Bentley’s incremental borrowing rate is 10%; however, the company knows that Harry’s implicit interest rate is 8%. What journal entry would Harry’s Leasing Company make at January 2, 2013, assuming this is a direct–financing lease?
PV Annuity Due PV Ordinary Annuity PV Single Sum |
Lease Receivable $479,125
Loss $140,875
Equipment $620,000
Lease Receivable $492,737
Equipment $492,737
Lease Receivable $620,000
Equipment $620,000
Lease Receivable $467,313
Equipment $467,313
