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Prepare Sunland journal entries

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Problem - Sunland Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,800 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,500, which Sunland is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $38,000. The implicit rate of the lease is not known to Sunland. Sunland's incremental borrowing rate is 6%. Prepare Sunland's 2020 journal entries.

Reference no: EM132951708

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