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Calculate the amount of the lease payment

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Question - Sales -Type Lease with Bargain Purchase. (Calculator set on BEG). On January 1, 2019, Lessor Corp. leased a piece of production equipment to Lessee Corp. under an 8-year lease, with payments due at the beginning of each year. Lessor manufactured the equipment at a cost of $500,000 and its typical sales price is $750,000. The annual Lease payment was computed based on an implicit interest rate of 5%. At the end of the lease, the Lessee has an option to purchase the equipment for $50,000, which both parties are reasonably certain will occur. The equipment has an estimated useful life of 10 years, after which no residual value is expected.

Required -

a. Calculate the amount of the lease payment that would be made at the beginning of each year.

b. Prepare amortization schedule covering the first 3 payments on this lease.

c. Prepare the Lessor's journal entry on January 1, 2016 to record the lease

d. Prepare the Lessee's journal entry on December 31, 2019 to record amortization expense on the Right of Use asset.

Reference no: EM132489830

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