Leased a delivery truck to YA right after purchasing it for $40,000 on December 31, 2021. Its retail value is $45,114. The lease agreement specifies annual payments of $11,000, including $1,000 maitenance fee, beginning December 31, and at each December 31 through 2024. The interest rate for determining payments was 10%. At the end of the four year lease term (December 31, 2025), the truck was expected to be worth $15,000. The useful life of the truck is five years with no salvage value. The company uses straight line method. In addition, the guaranteed residual value was $6,000. What is the journal entry/entries?

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Explanation:

Date Account Debit Credit

Dec 2021 lease receivable 44,000.00

unearned maintenance fee 4,000.00

asset (delivery truck) 40,000.00

dec 2022 cash/bank 11,000.00

unearned maintenance fee 1,000.00

lease receivable 10,000.00

depreciation expense 7,822.80

accumulated depreciation 7,822.80

dec 2023 cash/bank 11,000.00

unearned maintenance fee 1,000.00

lease receivable 10,000.00

depreciation expense 7,822.80

accumulated depreciation 7,822.80

dec 2024 cash/bank 11,000.00

unearned maintenance fee 1,000.00

lease receivable 10,000.00

depreciation expense 7,822.80

accumulated depreciation 7,822.80

dec 2025 cash/bank 11,000.00

unearned maintenance fee 1,000.00

lease receivable 10,000.00

depreciation expense 7,822.80

accumulated depreciation 7,822.80

dec 2025 asset 13,822.80

gain on lease 13,822.80