ACCT 304 Chapter 16 QUIZ
E21 6 Lessor Entries, Sales Type Lease Wadkins Company a machinery dealer leased a machine to
Romero Corporation on January 1, 2012. The lease is for an 8-year period and requires equal annual payments
of $38,514 at the beginning of each year. The first payment is received on January 1, 2012. Wadkins had
purchased the machine during 2011 for $170,000. Collectibility of lease payments is reasonably predictable,
and no important uncertainties surround the amount of costs yet to be incurred by Wadkins. Wadkins set
the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no
residual value and reverts to Wadkins at the termination of the lease.
Instructions
(a) Compute the amount of the lease receivable.
(b) Prepare all necessary journal entries for Wadkins for 2012.
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