Lease term of 4 years, non-cancellable

Annual payments $5,000 (due at beginning of each year, starting September 1, 2018)

Fair value of asset August 31, 2018, 2022 and 2024:

$24,000, $6,000 and $1,000 respectively

Probability-weighted expected value of residual $1,000

Lessors initial direct costs $365

Lease has renewal option, which will likely be taken to renew lease for 2 additional years at $4,500 per year

Lessees incremental borrowing rate = 9%

Rate implicit in the lease = 9%

Title retained by lessor

What is the Entry to record initial lease transaction (Right of use asset)