Assume the following:

1. A 3-year lease in initiated on January 1, X1 for equipment having an expected having an expected economic life of 5 year and a fair value of $144,288.

question: Journal entry

Lease Accounting Assume the following: 1. A 3-year lease in initiated on January 1, X1 for equipment having an expected economic life of 5 year and a fair value of $144,288. 2. Three annual lease payments $52,000 are required beginning January 1, X1. Two thousand dollars of the lease payments are to cover various expenditures of the lessor related to property taxes and insurance. 3. The lease agreement includes a bargain purchase option whereby the lessee can purchase the equipment for $10,000 on December 31, X3. The lessee expects the equipment to have a residual value of $1,000 by December 31, X5. 4. The lessee's incremental borrowing rate is 10% which reflects the lessor's implicit rate of return on the lease