(Lessor Entries with Bargain Purchase Option) A lease agreement between Earth Leasing Corporation and New Moon Company.
Instructions:
Do the following for the lessor.
(a) Compute the amount of the lease receivable at the inception of the lease.
(b) Prepare a lease amortization schedule for Earth Leasing Corporation for the 6-year lease term.
(c) Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2014, 2015, and 2016. The lessor's accounting period ends on December 31. Earth Leasing does not use reversing entries.