Question

Glennon Incorporated needs a new piece of equipment for its factory. Instead of purchasing the asset, the company chooses to enter into a 5-year operating lease with annual payments of $50,000. Assume each lease payment is made on December 31.
Required
a. Prepare the journal entry to record the first annual lease payment.
b. What are the financial reporting advantages of an operating lease over a capital lease?
c. Why might Glennon have chosen to lease the equipment instead of buying it?


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  • CreatedJuly 16, 2015
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