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Prepare the entries to record amortization for lessee inc

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Question - On January 1, 2020, Lessee Inc. enters into a 5-year equipment lease agreement for $42,000 annually (first payment due immediately). The lease grants the lessee an option to renew the lease for an additional 3 years. Lease payments adjust to current market rates for equivalent rentals at the time of renewal. Lessee Inc. is reasonably certain that it will exercise the renewal option due to the customization of the equipment. The estimated useful life of the equipment is 10 years. The lessee is not aware of the implicit rate of the lease, but the lessee's incremental borrowing rate is 6%. Prepare the entries to record amortization for Lessee Inc. for years 2020 and 2021.

Reference no: EM133147547

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