On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purchased the equipment for a cost of 60,000.

The lease agreement specifies Three annual payments of $15,000 beginning January 1, 20x4, the beginning of the lease, and at each December 31 from 20x4 to 20x7. The three-year term ending December 31, 20x7, is only 50% of the estimated useful life of the equipment. Smoothie LLC routinely acquires smoothie equipment for lease to other vendors. The interest rate in these financing agreements is 10%. Determine if the lease is a Finance Lease or Operating Lease and book the appropriate Journal Entries for 20x4 relating to the lease.

Answer rating: 100% (QA)

This is operating lease because only 50 of the estimated us... View the full answer