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Calculate the amount of the annual rental payment

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Reference no: EM132537940

Question - The following information pertains to a non-cancelable lease agreement between Global Corporation (Lessor) and Local Inc. (Lessee). Commencement Date 1/1/2019

Residual value of equipment at end of lease term, unguaranteed $45,000

Lease Term 8 years

Economic life of leased equipment 10 years

Fair value of asset at 1/1/2019 $500,000

Cost of asset $415,000

Lessor's implicit rate (not known to Lessee) 11%

Lessee's incremental borrowing rate 9%

The asset will revert to the lessor at the end of the lease term. The lessee uses straight-line amortization for all leased equipment. Collectibility of lease payments is probable. Lease payments are due on January 1 of each year, beginning 1/1/2019.

Required -

1. Calculate the amount of the annual rental payment.

2. What are the journal entries for Local for 2019?

3. What are the journal entries for Global for 2019?

Reference no: EM132537940

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