Lessor Accounting
On January 1, 2013, Greenspan Corporation, a machinery dealer, leased to Geitner Inc. a machine that cost $127,000 to manufacture. The lease agreement covers the 6-year useful life of the machinery and requires 6 equal annual payments of $39,200 payable each January 1, beginning January 1, 2013. An interest rate of 11% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Prepare Greenspan’s January 1, 2013, journal entries. Present value factor is 4.69590 for an annuity due and the present value factor for an ordinary annuity is 4.23054.