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The Edom Company, the lessor, enters into a lease with Jebusite Company to lease equipment to Jebusite beginning January 1, 2014. The lease terms, provisions,
The Edom Company, the lessor, enters into a lease with Jebusite Company to lease equipment to Jebusite beginning January 1, 2014. The lease terms, provisions, and related events are as follows:
- The lease term is five years. The lease is non-cancelable and requires annual rental receipts of $86,964.05 to be made in advance at the beginning of each year.
- The equipment has an estimated life of six years.
- Jubusite agrees to pay all executory costs.
- The interest rate of the lessee for this type of purchase is 8%.
The fair value of the minimum lease payments is $375,000, the fair market value of the asset $450,000.
- Prepare an amortization table for the first 3 years of lease payments and interest expense of the lessee.
- Prepare journal entries for Jebusite Company, the lessee, for the years 2014 and 2015.
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