Prepare the required journal entries on

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On January 1, 2016 Nezcorp enters a 3-year lease (cancelable with the payment of 85% of all remaining lease payments) with annual payments each January 1 (beginning January 1, 2016) of $10,000,000. The asset could be purchased for $30,000,000. Its useful life is 9 years. Its salvage value at the end of 3 years is $18,000,000; at the end of 9 years it is $5,000,000. An appropriate interest rate is 7.56%. The asset can be purchased at the end of the lease for $1,000. a. Is this a capital lease? Evaluate ALL of the criteria. b. Assume it is NOT a capital lease and that the purchase option will not be exercised. Prepare the required journal entries on: i. January 1, 2016 ii. December 31, 2016 iii. January 1, 2017 iv. December 31, 2017 v. January 1, 2018 vi. December 31, 2018 vii. January 1, 2019

Reference no: EM131292889

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