On 12-31-19, C leased a machine with a useful life of 4 years. The noncancelable lease agreement required C to make 3 annual lease payments of $100,000 starting 12-31-20. After making the last payment, C will retain the machine, i.e. a transfer of ownership. C’s borrowing rate on 12-31-19 was 4%. On 01-01-24, C sold the machine for $4,000. C uses a straight-line depreciation (amortization) method (no residual value) and only prepares AJEs every December 31. Determine if this lease is a long-term finance lease or a long-term operating lease and then prepare the lease-related entries C should make on:

1. December 31, 2019
2. December 31, 2020
3. December 31, 2021
4. December 31, 2022
5. December 31, 2023
6. January 1, 2024

Answer rating: 100% (QA)

The lease shall be treated as Finance lease as the ownership transfers to C a... View the full answer