Reference no: EM132919903

Question - Juan More Taco Corp (JMT) a publicly accountable entity is looking to expand their delivery fleet. Management has identified a need for 20 delivery vans at an estimated cost of $1,000,000. To finance the acquisition of the vans, JMT has negotiated a six-year lease with Seeger Financial Corp commencing December 31, 2019. Seeger has established an annual lease payment of $181,032 based on a rate of return in the lease of 6% (provided to the lessee) which is slightly higher than JMT's incremental borrowing rate of 5%. The first payment is due upon signing the lease. The rate of return is based on JMT guaranteeing a total residual value for the vans of $80,000 of which JMT management believes is $30,000 more than the anticipated residual value for the delivery vans.

REQUIRED -

i. Prepare the journal entry(s) for Seeger Financial Corp. for the inception of the lease and the first year of the lease.

ii. Prepare the journal entry(s) for Juan More Taco Corp. for the inception of the lease and the first year of the lease.

iii. Describe the differences in the accounting for the lease from the perspective of the lessee if the entity had adopted ASPE.