Jones Corporation leases a truck starting January 1, 20x1 from Lester Inc. The six year lease requires annual payments of $12,000 at the beginning of each year. The economic life of the truck is ten years. The present value of the lease payments is $60,000. Use straight line depreciation. Lester Inc. purchased the machine for $54,000 and it has a fair value at the commencement of the lease of $60,000. The interest rate (known to both parties) is 8%. The residual value at the end of the lease is $10,000 and the residual value at the end of the economic life is $5,000.

Record the lessee’s entries for the year’s 20x1.

Record the lessor’s entries for the year’s 20x1.