Kingbird Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Blossom 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
2.
Blossom has the option to purchase the equipment for $12,000 upon termination of the lease. It is not reasonably certain
that Blossom will exercise this option.
The equipment has a cost of $100,000 and fair value of $120,000 to Kingbird Leasing. The useful economic life is 2 years,
with a residual value of $12,000.
Kingbird Leasing desires to earn a return of 6% on its investment.
3.
4.
Collectibility of the payments by Kingbird Leasing is probable.
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Your answer is partially correct.
Prepare the journal entries on the books of Kingbird Leasing to record the payments received under the lease and to recognize
income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when
amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select \"No Entry\" for the
account titles and enter 0 for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and
round final answers to 0 decimal places e.g. 5,275.)
Date
Account Titles and Explanation
Debit
Credit
1/1/25
Lease Receivable
120000
Cost of Goods Sold
100,000
Sales Revenue
120,0
Inventory
1000
3/31/25
Cash
64,000
Lease Receivable
57,2
Interest Revenue
6,7
3/31/26
Cash
64,000
Lease Receivable
60,5
Interest Revenue
3,4