On January 1 2021 Salvatore Company leased several machines from Nola Corporation under a three year operating lease agreement. The lease calls for semiannual payments of $15,000 each payable on June 30 and December 31 of each year. The machines were acquired by Nola at a cost of $90,000 and are expected to have a useful life of five years with no expected residual value Required Prepare the appropriate journal entries for the lessor from the beginning of the lease through the end of 2021. Of no entry is required for a transaction/event, select "No Journal entry required" in the first account field.)

Answer and Explanation:

The journal entries are shown below:

1. Equipment $90,000

To Cash $90,000

(Being the cost of the building is recorded)

For recording this we debited the equipment as it increased the assets and credited the cash as it decreased the assets

2. Cash $15,000

To Lease Revenue $15,000

(Being the recognition of revenue is recorded)

For recording this we debited the cash as it increased the assets and credited the lease revenue as it also increased the revenue

3. Cash $15,000

To Lease Revenue $15,000

(Being the recognition of revenue is recorded)

For recording this we debited the cash as it increased the assets and credited the lease revenue as it also increased the revenue

4. Depreciation $18,000 ($90,000 : 5 years)

To Accumulated depreciation $18,000

(Being the depreciation expense is recorded)

For recording this we debited the depreciation as it increased the expenses and credited the accumulated depreciation as it decreased the assets