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2. Hayes Corp. is a manufacturer of truck trailers. On January 1, 2020, Hayes Corp. leases a total of ten trailers to Lester Company under a six-year non-cancelable lease agreement. The following information about the lease and the trailers is provided:

1. Equal annual payments that are due on January 1 each year provide Hayes Corp. with an 10% return on net investment

2. Titles to the trailers pass to Lester at the end of the lease.

3. The fair value of each trailer is $60,000. The cost of each trailer to Hayes Corp. is $54,000. Each trailer has an expected useful life of nine years.

4. Collectibility of the lease payments is probable.

(a) What specific type of lease is this for the lessor and why?

(b) Calculate the annual lease payment for the 10 trailers. (Round to nearest dollar.)

(c) Complete the following amortization table for the first two years of the lease, and prepare all of the journal entries for the lessor for 2020 (Round all amounts to the nearest dollar). (3 points)

Amortization Table
				Lease Receivable
	Lease payment	Interest	Principal
2020
2021

Date	Account Titles	Debit	Credit

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