On 12-31-19, C leased a machine with a useful life of 4 years. The noncancelable lease agreement required C to make 3 annual lease payments
On 12-31-19, C leased a machine with a useful life of 4 years. The noncancelable lease agreement required C to make 3 annual lease payments of $100,000 starting 12-31-20. After making the last payment, C will retain the machine, i.e. a transfer of ownership. C’s borrowing rate on 12-31-19 was 4%. On 01-01-24, C sold the machine for $4,000. C uses a straight-line depreciation (amortization) method (no residual value) and only prepares AJEs every December 31. Determine if this lease is a long-term finance lease or a long-term operating lease and then prepare the lease-related entries C should make on:
- December 31, 2019
- December 31, 2020
- December 31, 2021
- December 31, 2022
- December 31, 2023
- January 1, 2024
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The lease shall be treated as Finance lease as the ownership transfers to C a... View full answer
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Authors: Edward J. Blocher, David E. Stout, Gary Cokins
5th edition
73526940, 978-0073526942
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