• Lease period: 4 years, beginning on 1 Jan 2018.
• The selling price of the leased equipment is 80,000.
• Firm G paid 65,000 to purchase the leased equipment on 1 Jan 2018.
• Periodic payment: 22,346 payable annually in advance.
• The first lease payment is on 1 Jan 2018 & the remaining three subsequent lease payments are on each reporting date (i.e., reporting date, 31 Dec)
• The estimated useful life of the leased equipment is 4 years.
• The lessee will return the leased equipment to the lessor at the end of the lease term.
• The expected residual value of the equipment at the end of the lease term is 0.
• The residual value of leased equipment is not guaranteed.
• Implicit interest rate: 8%
• Incremental borrowing rates: 10%
• The lessee does not know the implicit interest rate.
• The lessee uses the straight-line depreciation method for the leased equipment.

1. Write down all the journal entries related to the leased equipment for the lessor in 2018.

Answer