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10. Haulers Co. signed a lease on January 1 with Gandolfini Bank for a garbage truck. The truck is not specialized in nature. The lease
10. Haulers Co. signed a lease on January 1 with Gandolfini Bank for a garbage truck. The truck is not specialized in nature. The lease has a 10-year term with no purchase option or transfer of ownership. Under the terms of the contract, Haulers must pay $16,500 on January 1 of each year. The truck has an economic life of 40 years and a fair value of $173,000. If Haulers borrowed at NxJ Bank, the loan would carry an interest rate of 7%, which implies that the present value of the payments due under the lease is $124,000. The expected residual value at the end of the lease term is $96,000. The lessee guarantees the entire residual value. The lessee and the lessor do not incur any initial direct cost. The carrying value of the truck in Gandolfini Bank's inventory was $112,000. Prepare the journal entries for the lessor at the commencement of the lease. Check all of the answers that apply
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