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Annual lease payments at the beginning of each year

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Reference no: EM131005302

Terms of a lease agreement and related facts were:

a. Leased asset has a retail cash selling price of $100,000. Its useful life is six years.

b. Annual lease payments at the beginning of each year are $20,873, beginning January 1. The lease term is six years.

c. Lessor's interest rate when calculating annual lease payments was 9%.

d. Costs of negotiating and consummating the completed lease transaction incurred by the lessor are $2,062.

Required:

Prepare the appropriate entries for the lessor to record the lease, the initial payment at its commencement, and at the December 31 fiscal year-end under each of the following two independent assumptions:

1. The lessor recently paid $100,000 to acquire the asset.

2. The lessor recently paid $85,000 to acquire the asset.

Reference no: EM131005302

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