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Provide the journal entry ABC Corp will record

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Reference no: EM132801810

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

(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.

Reference no: EM132801810

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