Problem 15-4 Capital lease [LO15-5]

At the beginning of 2013, VHF Industries acquired a machine with a fair value of $7,331,130 by signing a three-year lease. The lease is payable in three annual payments of $3.0 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1.	What is the effective rate of interest implicit in the agreement?

2.4.

Prepare the lessees journal entries at the inception of the lease, the first lease payment at December 31, 2013 and the second lease payment at December 31, 2014. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.Enter your answers in whole dollars.) I have the journal entries Jan 1 2013 Lease asset dr Lease Payable CR December 31 Interest Expense Lease Payable Cash December 31 Interest Expense Lease Payable Cash