Question: On January 2 , 2 0 1 9 , Lafayette Machine Shops Inc. signed a 1 0 - year noncancelable lease for a heavy -

On January

2, 2019,

Lafayette Machine Shops Inc. signed a

10 -

year noncancelable lease for a heavy

-

duty drill press, stipulating annual payments of $

15, 000

starting at the end of the first year, with title passing to Lafayette at the expiration of the lease. Lafayette treated this transaction as a finance lease. The drill press has an estimated useful life of

15

years with no salvage value. Lafayette uses straight

-

line depreciation for all of its fixed assets. Aggregate lease payments were determined to have a present value of $

92, 170,

based on implicit interest of

10 % .

For

2019,

Lafayette should record:

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