Question

Rexon Company leases equipment to Ten-Care Company beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

1.	The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year.
2.	The cost, and also fair value, of the equipment is $400,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time.
3.	Ten-Care agrees to pay all executory costs.
4.	The lease contains no renewal or bargain purchase option.
5.	The interest rate implicit in the lease is 12%.
6.	The initial direct costs are insignificant and assumed to be zero.
7.	The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.

2.	Prepare a table summarizing the lease receipts and interest revenue earned by Rexon.
3.	Prepare journal entries for Rexon for the years 2016 and 2017.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Calculation of equal payment		$400,000/	4.967640	$                   80,521
			(PV 8 Years, 12%)
Part 2
Date	Annual Lease Payment	Interest 12%	Net Investment	Lease Receivable	Unearned Lease	Net Investment
			Recovered
	a	b	a-b=c	Lease Receivable-c	Unearned Lease-b	NI-C
January 1 2016				$            644,169.06	$                244,169	$          400,000
Dec 31 2016	$                                 80,521	$        48,000	$                32,521	$                 611,648	$                196,169	$          367,479
Dec 31 2017	$                                 80,521	$        44,097	$                36,424	$                 575,224	$                152,072	$          331,055
Dec 31 2018	$                                 80,521	$        39,727	$                40,795	$                 534,430	$                112,345	$          290,261
Dec 31 2019	$                                 80,521	$        34,831	$                45,690	$                 488,740	$                  77,514	$          244,571
Dec 31 2020	$                                 80,521	$        29,349	$                51,173	$                 437,567	$                  48,165	$          193,398
Dec 31 2021	$                                 80,521	$        23,208	$                57,313	$                 380,254	$                  24,957	$          136,085
Dec 31 2022	$                                 80,521	$        16,330	$                64,191	$                 316,063	$                    8,627	$            71,894
Dec 31 2023	$                                 80,521	$          8,627	$                71,894	$                 244,169	$                          -0	$                      0
Part 3
Date	Account	Debit	Credit
Year 2016
Jan 1	Lease Receivable	$     644,169
	Equipment		$              400,000
	Unearned Interest-Leases		$              244,169
Dec 31	Cash	$        80,521
	Lease Receivable		$                80,521
Dec 31	Unearned Interest-Leases	$        48,000
	Interest Revenue		$                48,000
Year 2017
Dec 31	Cash	$        80,521
	Lease Receivable		$                80,521
Dec 31	Unearned Interest-Leases	$        44,097
	Interest Revenue		$                44,097