On January 1, 2018, Sans Serif Publishers leased printing equipment from First LeaseCorp. First LeaseCorp purchased the
Question:
On January 1, 2018, Sans Serif Publishers leased printing equipment from First LeaseCorp. First LeaseCorp purchased the equipment from CompuDec Corporation at a cost of $479,079. Sans Serif’s borrowing rate for similar transactions is 10%.
The lease agreement specifies four annual payments of $100,000 beginning January 1, 2018, the beginning of the lease, and each December 31 from 2018 through 2020. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $348,685.
Determine whether it is a finance lease or an operating lease and prepare journal entries for both lessor and the lessee on January 1, 2018; 12/31/2018.
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas