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Determine the journal entry at commencement of the lease

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Reference no: EM132466879

Problem 1: Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $89,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Carla Vista expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.

Question problem : Explain an example of the journal entry at commencement of the lease for Carla Vista.

Reference no: EM132466879

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