On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purchased the equipment for a cost of 50,000. The lease agreement specifies Four annual payments of $15,000 beginning January 1, 20x4, the beginning of the lease, and at each December 31 from 20x4 to 20x8. The four year term ending December 31, 20x8, is equal to 50% of the estimated useful life of the equipment. Smoothie LLC routinely acquires smoothie equipment for lease to other vendors. The interest rate in these financing agreements is 10%. Determine if the lease is a Finance Lease or Operating Lease and book the appropriate Journal Entries for 20x4 relating to the lease
Journal Entries