Can someone check my answers.
A car dealership gives customers the choice of buying or leasing its cars. The cars cost $20,000 and are sold for $25,000. The standard lease contract is for four years, with the first payment made at the time the lease is signed. Annual payments are made on January 1, of each year. At the end of the lease, the lessee guarantees that the car will be worth $7,000. The dealership requires an 8 percent return on these leases.
Required- Prepare the journal entries (January 1 & December 31) for the dealership for the first year; assuming the car is leased on January 1. (Hint: Annual lease payment [25000-($7000*0.7350)]/3.5771=$5551
My answer:
Jan. 1
Lease Receivable 29204 (debit)
(5551*4+7000)
Sales 25000(credit)
Unearned Interest Income 4204(credit)
Jan. 1
Cost of sales 20000 (debit)
Inventory 20000 (credit)
Jan 1
Cash 5551 (debit)
Lease Receivable 5551 (credit)
Jan 1
Unearned Interest Income 2000 (debit)
Interest Income 2000 (credit)
(25000*.08)
Dec. 31 I wasn't sure how to accrue the interest income.
1 answer