Agreement to lease a piece of equipment

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On January 1, 2012, P&P Products entered into an agreement to lease a piece of equipment from Beta Company, Inc. The lease term is for five years at 8% interest, and the useful life of the equipment is six years. The first lease payment is made Jan. 1, 2012. The machine has a fair value of $600,000 and zero residual value. P & P Products does not know the implicit interest rate that Beta uses. Assume that the entries have not yet been made in the books of P & P Products.

Required: Make all of the necessary entries on the books of P & P Products for the two years. (Disregard years 3-5)

Reference no: EM13824151

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