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What are the journal entries to these transactions

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The owner of the equipment and Eads management negotiated a capital lease agreement. The present value of the lease agreement is $92,000. The contract carried the following terms:

Period of time: 8 years

Interest rate: 8%

Total payment (including principal and interest) due December 31 of each year: $16000

The first two payments of $16,000 are to be allocated to interest and principal as follows (amounts are rounded to the nearest $10)

December 31 20X1 interest= 78360 principal= 8640

December 31 20X2 interest= 6670 principal= 9330

The manager decides to compute depreciation using straight-line depreciation with a life equal to the eight-year contract term and no salvage value.

What are the journal entries to these transactions?

Reference no: EM131816326

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