Final answer:
For the final payment of a lease, the lessor typically debits cash/lease receivable and credits interest revenue and the lease receivable account. When the leased asset is returned, the lessor records the residual value by debiting a lease residual asset account and crediting the leased equipment account.
Step-by-step explanation:
When dealing with equipment leases, the accounting treatment for the lessor includes entries for the final payment and when the leased asset is returned. For the final payment, the entry typically involves debiting cash/lease receivable and crediting interest revenue (if applicable) and the lease receivable account to lower it for the payment received.
At the end of the lease term, when the leased asset is returned, the lessor will record the residual value if the asset has any. This involves debiting a lease residual asset account and crediting the leased equipment account. The residual value refers to the estimated fair value of the equipment at the end of the lease term. It is important for the lessor to assess the condition of the asset and compare it to the expected residual value. If the asset's value differs materially from the residual value, the lessor may need to make additional adjustments to their ledger.