Lenning Company is a manufacturer of various types of farming equipment. Lenning then sells or...

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Lenning Company is a manufacturer of various types of farming equipment. Lenning then sells or leases the equipmment through online platforms.
On 1/1/20, Lenning leased a combine harvester to Good Earth Farms. Data relating to the lease follow:

		Cost of equipment to Lenning	$360,000
		Fair market value of equipment at 1/1/20	$475,000
		Useful life of equipment	8 years
		Lease term	5 years
		Residual value at the end of the lease
		(guaranteed by Good Earth)	$60,000
		Residual value expected by Good Earth	$45,000
		Implicit and incremental interest rates	8%
		Initial direct costs incurred by Good Earth in negotiation	$10,000

Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31.

Required:
a. Calculate the yearly payment that Lenning will charge Good Earth under this lease agreement if payments are made
	on 1/1 of each year, beginning 1/1/20.

b. Prepare all journal entries that would be made by Lenning (lessor) during 2020 and 2021 relating to this lease.

c. Prepare all journal entries that would be made by Good Earth (lessee) during 2020 and 2021 relating to this lease.

d. Prepare the journal entries made by both Lenning and Good Earth with respect to the lease termination if the actual residual
	value of the computer equipment is $50,000.