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Determine the appropriate classification for this lease

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Reference no: EM133057544

Question - The following are characteristics of a lease entered into on January 1, 2020:

Price of leased asset from manufacturer 278,287

Lease payments 75,000

Lease term 4 years

Lease frequency Annual

Payment timing End of year

Guaranteed residual value 15,000

Expected payout under the guaranteed residual 15,000

Interest rate implicit in the lease agreement 5%

Required - SHOW YOUR WORK

a. Determine the appropriate classification for this lease for the lessor (who is not the manufacturer).

b. Record the journal entries for the lessor for the first year of the lease.

Reference no: EM133057544

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