Present value of lease payment | |||||
Fair value | 160000 | ||||
less: present value of residual value (16000*0.90703) | 14512 | ||||
Present value of lease payment | 145488 | ||||
annual lease payment (145488/1.85941) = 78244 | |||||
Journal entries | |||||
Date | Particulars | Debit | Credit | ||
01-01-2017 | lease receivable | 160000 | |||
cost of goods sold | 105488 | ||||
sales | 145488 | ||||
inventory | 120000 | ||||
12/31/17 | cash | 78244 | |||
lease receivable | 70244 | ||||
interest revenue (160000*5%) | 8000 | ||||
12/31/18 | cash | 78244 | |||
lease receivable | 73756 | ||||
interest revenue (160000-70244)*5% | 4488 |
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