Metlock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Ivanhoe Company. The termof 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. Ivanhoe has the option to purchase the equipment for $22,000 upon termination of the lease. It is not reasonably certain that Ivanhoe will exercise this option. 2. The equipment has a cost of $240,000 and fair value of $269,000 to Metlock Leasing. The useful economic life is 2 years, with a residual value of $22,000. 3. Metlock Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Metlock Leasing is probable. 4. Click here to view factor tables. Prepare the journal entries on the books of Metlock Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Question
Metlock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Ivanhoe Company. The
termof 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. Ivanhoe has the option to purchase the equipment for $22,000 upon termination of the lease. It is not reasonably certain
that Ivanhoe will exercise this option.
2.
The equipment has a cost of $240,000 and fair value of $269,000 to Metlock Leasing. The useful economic life is 2 years,
with a residual value of $22,000.
3.
Metlock Leasing desires to earn a return of 5% on its investment.
Collectibility of the payments by Metlock Leasing is probable.
4.
Click here to view factor tables.
Prepare the journal entries on the books of Metlock Leasing to reflect the payments received under the lease and to recognize
income for the years 2020 and 2021. (Credit account titles are automatically indented when amount is entered. Do not indent
manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal
places e.g. 5,275.)
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Transcribed Image Text

Metlock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Ivanhoe Company. The termof 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. Ivanhoe has the option to purchase the equipment for $22,000 upon termination of the lease. It is not reasonably certain that Ivanhoe will exercise this option. 2. The equipment has a cost of $240,000 and fair value of $269,000 to Metlock Leasing. The useful economic life is 2 years, with a residual value of $22,000. 3. Metlock Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Metlock Leasing is probable. 4. Click here to view factor tables. Prepare the journal entries on the books of Metlock Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

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