Question
Lucky Inc. leased equipment to Smeal Company on January 1, 2021. The lease payments were calculated to provide the lessor a 10% return. Ten annual
Lucky Inc. leased equipment to Smeal Company on January 1, 2021. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $20,000 are due beginning on January 1, 2021 and at each December 31st thereafter through 2029. The present value of an annuity due of $1 at 10% for ten periods is 6.75902. Required:
1. Prepare the journal entries to record the lease by Smeal at January 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be a finance lease. Round your answers to the nearest whole dollar amounts.
2. Prepare the journal entries to record the lease by Smeal at January 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be an operating lease. Round your answers to the nearest whole dollar amounts.
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