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In: Accounting

. On January 3, 2020, Hanna Corp signed a lease on a machine and the lease...

. On January 3, 2020, Hanna Corp signed a lease on a machine and the lease commences the same date. The lease requires Hanna too make six annual lease payments of $12000 with the first payment due on December 31, 2020. Hanna could have financed the machine by borrowing at an interest rate of 7%. What entries would the company record on Jan 3 and December 31, 2020 if the lease is classified as a finance lease?

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Expert Solution

if we treat the lease as finance lease, we have to record lease asset as well as lease liability for the amount equal to Present value of lease payments.

lease asset will be depreciated over the life of lease i.e. 6 years.

interest expenses will be charged @ 7% per annum on $57,198.

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ekkarill92 answered 2 years ago
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