Reference no: EM132735762
leased equipment from Lessor Co., also a publicly accountable entity, on December 31, 2018.
Fair value of equipment leased at lease date $160,000
Lease term 8 years
Economic life of equipment 12 years
Residual value at end of lease term $ 20,000
Residual value at the end of economic life $ 5,000
SMC's incremental borrowing rate 6%
Interest rate implicit in the lease (known to SMC) 7%
Question 1: the amount of the lease payment required by Lessor Co.?
Question 2: whether the lease is an operating or a finance lease from the perspective of Lessor Co.
Question 3: describe how SMC should account for this lease.
Question 4: journal entries that SMC should record for the years ended December 31, 2018, and December 31, 2019.
Question 5: presentation of the lease obligation for SMC's statement of financial position at December 31, 2019.
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