Question
Greef Carga Corporation leased equipment from Palpatine Company The lease term is 5 years, requires payments of $30,000 at the end of each year and
Greef Carga Corporation leased equipment from Palpatine Company The lease term is 5 years, requires payments of $30,000 at the end of each year and contains a bargain purchase option. At the end of the lease, Greef Carga has an option to pay $5,000 to purchase the equipment. The equipment has a fair value at the inception of the lease of $125,000 and an estimated useful life of 20 years. The lease agreement stipulates that Palpatine receive a rate of retum of 8% each year which is lower than Greef Carga's incremental borrowing rate Greef Carga's journal entries associated with this lease in the the first year would include Oa debit to Lease Liability of $123,184.21 a debit to Interest Expense of $7.454.74 O a credit to Lease Liability of $20,145.25 a credit to Right-of-Use Asset of $24.636 84
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