Reference no: EM13136960
Lessor accounting-direct-financing lease.
E Leasing purchased a machine for $500,000 and leased it to IGA, Inc. on January 1, 2011.
Lease Description:
1. Quarterly rental payments: 32,629- Begining of each period
2. Lease term: 5 years (20 quarters)
3. No residual value: no BBP
4. Economic Life of machine 5 years
5. Implicit interest rate and lessee's incremental borrowing rate 12%
6. Fair Valu of Asset: $500,000
Collectability of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred.
Required:
Prepare appropriate entries for both IGA and E Leasing from the inception of the lease through the second rental payment on April 1, 2011. Depreciation is recorded at the end of each fiscal year.
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