We assume that the lease is appropriately recorded as an operating lease by Harter, 

Harter Company leased machinery to Stine Company on Jan 1, 2018, for a ten-year period expiring Jan 1, 2028. Equal annual payments under the lease are $250,000 and are due on Jan 1 of each year. The first payment was made on Jan 1, 2018. The rate of interest used by Harter and Stine is 9%. The lease receivable before the first payment is $1,750,000 and the cost of the machinery on Harter’s accounting records was $1,550,000. 

 

On 1/1/2018, the entry to record the operating lease is 

options:

	Lease receivable 1,750,000 Leased asset 1,750,000
	Cost of goods sold 1,550,000 Lease receivable 1,550,000
	Cash 250,000 Unearned revenue 250,000
	b and c

 

On 12/31/2018, the entry to record the operating lease is 

 options:

	Lease receivable 1,750,000 Leased asset 1,750,000
	Cost of goods sold 1,550,000 Lease receivable 1,550,000
	Unearned revenue 250,000 Lease revenue 250,000
	b and c

 

On 12/31/2018, does the lessor, Harter, need to record depreciation expense for the machinery? 

options:

	no
	yes