Reference no: EM132563464

Question - On January 1, 2022, Dell Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dell to make annual payments of $180,000 at the end of each year for ten years with the title passing to Dell at the end of this period. The machinery has an estimated useful life of 12 years and no salvage value. Dell uses the straight-line method of depreciation for all of its fixed assets. Dell accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $1,106,023 at an effective interest rate of 10%.

Required -

1) With respect to this capitalized lease, what is the journal entry to handle interest on 12/31/2022?

2) With respect to this capitalized lease, what is the journal entry to handle depreciation on 12/31/2022?