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Compute the effective interest rate on the lease

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Question - On January 1, 2020, Q-Mart entered into a five-year lease agreement requiring annual payments of $10,000 on December 31 of each year. The fair market value of the building was estimated by appraisers to be $39,927.

Required - Compute the effective interest rate on the lease, and record the journal entries required over the five-year period. Assume that the capitalized asset is depreciated over a five-year period, using the straight-line method with no salvage value.

Reference no: EM133063315

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