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Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co....

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Accounting

Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $55,000 for the equipment in its inventory account. The lease commenced on January 1,2020, with the first annual payment of $18,500 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $68,880, and no residual or salvage value. The implicit rate of the lease is 5% and collectability of the lease payments from Parker is probable. Franklin's journal entries at the commencement of the sales-type lease would include.
A. Credit of fair value to Sales Revenue
B. A debit of net book value to Cost of Goods Sold
C. A credit to Lease Receivable for the first annual payment
D. A&B
E. All of the above
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