On January 1, 2004, Zonal Company leased equipment to Ethan & Sons Co. for 8 years. The cost of the leased equipment was $110,000, and the fair value of the asset was $234,736.80. The lease required an annual payment of $40,000 at the beginning of each year. The interest rate implicit in the lease was 10%. Which of the following amounts should the lessor debit to Lease Receivable at the inception of the lease?

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At the inception of the lease, the lessor should record the Lease Receivable at the fair value of the leased asset, which is $234,736.80. This is because the lease receivable should reflect the amount the lessor expects to receive over the lease term, which is based on the fair value of the leased asset when the lease is a sales-type or direct financing lease.

On January 1, 2004, Zonal Company Leased Equipment to Ethan