Record lease and first lease payment on Cullumber Company

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On January 2, 2017 Cullumber Company leases a machine with a fair value of $36,000 from Snead, Inc., on the following terms:

1. Noncancelable term of 4 years.

2. Rental of $8,800 per year (at beginning of each year).

3. Estimated residual value after 4 years is $4,300. Cullumber Company guarantees the residual value of $4,300.

4. Estimated economic life of the machine is 5 years.

5. Cullumber Company's incremental borrowing rate is 7% a year. Snead's implicit rate is unknown.

Question 1: Record the lease and first lease payment on Cullumber Company's books at the date of inception.

Reference no: EM132586410

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