Company X leased an asset to Y on December 31 2014 with the first payment occurring on that date.The lease was a sales-type lease (it met all the conditions).The cash payment on December 31, 2014 was $1,582 representing 1/5th of the lease arrangement.Assuming that the profit on the sales amounted to 11% of the total lease receivable and the unearned finance revenue was 1.57 times the profit on the sale, prepare the journal entry at the inception of the lease (use the gross profit method).

Question

Quizplus · Accepted Answer

The Answer of Company X leased an asset to Y on December 31 2014 with the first payment occurring on that date.The lease was a sales-type lease (it met all the conditions).The cash payment on December 31, 2014 was $1,582 representing 1/5th of the lease arrangement.Assuming that the profit on the sales amounted to 11% of the total lease receivable and the unearned finance revenue was 1.57 times the profit on the sale, prepare the journal entry at the inception of the lease (use the gross profit method).

Company X Leased an Asset to Y on December 31