(This Problem Requires Use of PV Tables with an 11

question 2

Essay

(This problem requires use of PV tables with an 11% rate, a financial calculator or the formulas.)
Taquito Company leased equipment to Baja Company on January 1, 2014. The lease was for five years and required annual payments of $24,500 on January 1 of each year with the first payment due January 1, 2014. The equipment had a cost to Taquito of $85,000 and no expected residual value at the end of the lease term. The lease was appropriately accounted for as a sales-type lease by Taquito. Taquito used a 11% rate of return to establish the lease payments.
Required: Required:
a.Prepare all 2014 journal entries for Taquito related to the lease.
b.What amount of interest revenue would Taquito recognize for the year ended December 31, 2015?

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Definitions:

Setup For One Run

The preparation and adjustment activities required to switch a production process or machine from making one product or batch to another.

Activity Cost

The financial sum associated with carrying out a specific business task or operation, usually involved in budgeting and accounting.

Activity-based Costing System

An accounting method that assigns costs to products and services based on the activities and resources that go into creating them, providing more precise costing information.

Making Patterns

The process of creating templates or models to be used in manufacturing or craft projects, ensuring consistency and precision in production.