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Prepare the journal entry at commencement of the lease

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Question - Ivanhoe Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $92,000. 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. Ivanhoe 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.

Required - Prepare the journal entry at commencement of the lease for Ivanhoe.

Reference no: EM133076878

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