Use the information for Lai Corporation from BE20–11. Assume that instead of costing Lai $175,000, the equipment was manufactured by Lai

Use the information for Lai Corporation from BE20–11. Assume that instead of costing Lai $175,000, the equipment was manufactured by Lai at a cost of $137,500 and the equipment’s regular selling price is $175,000. Prepare Lai Corporation’s January 1, 2011 journal entries at the inception of the lease and the entry at December 31, 2011, to record interest.

Lease Payments Receivable............... 202,920

    Sales...............................           175,000

    Unearned Interest Income—Leases ....            27,920

                                     

Cost of Goods Sold...................... 137,500

    Inventory Finished Goods............           137,500

Cash.................................... 40,584

    Lease Payments Receivable...........            40,584

Unearned Interest Income—Leases.........  10,753

    Interest Income—Leases..............            10,753

      [($175,000 – $40,584) X 8%]