On January 1, 2011, the Stridewell Wholesale Shoe Company signed a 25-year non-cancelable lease agreement for an office building. Terms of the lease call for Stridewell to make annual lease payments of $10,000 at the beginning of each year, with the first payment due on January 1, 2011. Assuming an interest rate of 10% properly reflects the time value of money in this situation, how should Stridewell value the asset acquired and the corresponding lease liability if it is to be treated in a manner similar to an installment purchase? Show journal entries reporting the purchase and interest payments for 2011, 2012 and 2013.

Answer rating: 100% (QA)

First find the value of the leased asset Office Bldg Annual lease ... View the full answer