Reference no: EM132791973
Question - ABC Corp. enters into a new lease for a machine on 1/1/2020 with the following terms:
Length of lease: 8 years, after which ownership resorts back to the lessor
Lease payment: $50,000 due on the end of each year
The machine is expected to last 8 years and have no residual value
The applicable interest rate is 10%
There is no bargain purchase option
The machine has no alternative use to the lessor at the end of the lease term
Required -
(a) Assuming the lease is classified as an operating lease under the new accounting laws for leases, please provide the journal entry ABC Corp. will record on 1/1/2020.
(b) Assuming the lease is classified as an operating lease under the new accounting laws for leases, please provide all journal entries ABC Corp. will record on 12/31/2020 in relation to this lease.
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