On January 1, 2020, Aylmer decided to lease a machine. The accountant at the time did not know how to record this asset (the accountant did not take Intermediate Accounting 2 at Fanshawe!). NO TRANSACTIONS relating to leases were recorded. The following information pertains to the leased machine:

• The lease term is 6 years and the economic life of the asset is 7 years.
• The annual lease payment is $25,600. In addition to the lease payment, annual executory costs (insurance) of $890 must be made.
• Interest rate associated with this lease is 4%

Make the appropriate calculations and requirements for reconciling the lease information. Then prepare all the appropriate entries (including setup up the asset, the liability and any payments and interest).

PV
Rate
Nper
Pymt
FV
Type

This is my starting point.

Interest Expense

Interest Payable

(To record interest on Note)

Right of Use Asset

Lease Liability

(To record beginning of lease)

Lease Liability

Cash

(Recording of lease Payment)