Well of course Columbus knew there were lands within sailing distance of the Western coast of Europe! That's why he wanted to travel there!! His big mistake was assuming that those lands had to be Asia.

"Farther westwards there is another land, named Marckalada, where giants live; in this land, there are buildings with such huge slabs of stone that nobody could build them, except huge giants. There are also green trees, animals and a great quantity of birds.”

Not exactly an accurate description of Newfoundland! Obviously imagination had been at work on Norse reports of Markland.