LEASES Problem A firm signed an operating lease for 10 years with annual payments of $6,000 to be remitted at the end of each year. Thus the future cash flows to be paid as part of the lease sum to $60,000. The interest rate is 5% and so the Present Value of future cash flows is $46,330.

a) What journal entry, if any, are they required to record at the inception of the lease?

b) Show the journal entry at the end of the first year of the lease (for simplicity assume the financial statements are only prepared annually so you dont need to worry about any quarterly adjustments).