On 01-01-20, C leased a machine with a useful life of 10 years. The noncancelable lease agreement
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Question:
On 01-01-20, C leased a machine with a useful life of 10 years. The noncancelable lease agreement required C to make 2 annual lease payments of $50,000 starting 01-01-20. On 12-31-21, C will return the machine to the lessor. C's borrowing rate on 01-01-20 was 4%. C uses a straight-line depreciation method and assumes no salvage value. C only prepares AJEs every 12-31. Determine if this is a long-term finance lease or a long-term operating lease and then prepare the lease-related entries C should make on:
a. 01-01-20
b. 12-31-20
c. 01-01-21
d. 12-31-21
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