Shamrock Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to...

Shamrock Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Pharoah Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:

1. Pharoah has the option to purchase the equipment for $17,500 upon termination of the lease. It is not reasonably certain that Pharoah will exercise this option.

2. The equipment has a cost of $150,000 and fair value of $199,000 to Shamrock Leasing. The useful economic life is 2 years, with a residual value of $17,500.

3. Shamrock Leasing desires to earn a return of 5% on its investment. 4. Collectibility of the payments by Shamrock Leasing is probable.

Prepare the journal entries on the books of Shamrock Leasing to reflect the payments received under the lease and to recognize income for the years 2017 and 2018.

Expert Solution

ekkarill92 answered 2 months ago

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