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Prepare Blue journal entries on January

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Question - Blue Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The lease calls for annual lease payments of $11,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment.

Required - Prepare Blue' journal entries on January 1, 2020 (commencement of the operating lease), and on December 31, 2020. Assume the implicit rate used by the lessor is 5%, and this is known to Blue.

Reference no: EM132707871

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