Lessee and Lessor on January 1, 2019 enter into a 5-year non-cancelable lease for equipment having an estimated useful life of 8 years. Lessor's implicit rate is 8%. Lessee uses the straight-line basis for depreciation. The lease contains the following provisions: 1. Rental payments of $30,000 including $5,000 for executory costs, payable at the end of year. 2. There is a bargain purchase option at the end of the lease for $8,000. 3. The equipment has a cost of $90,000 and fair value of $115,000. Collectability of lease payments is probable. INSTRUCTIONS

(a) What kind of lease is this to the lessee and lessor?

(b) Prepare the journal entries on the books of Lessee and Lessor through December 31, 2023.

(c) What if there is no bargain purchase option, but an unguaranteed residual value of $8,000?

Answer rating: 100% (QA)

Answer Rental Payment 30000 Lease Implicit Rate 8 Including 5000 Executary Costs Bargain Purchase at the End of Lease 8000 Equipment Cost 90000 Fair Value 115000 aKind of Lease Is Finance lease becaus... View the full answer