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On January 1, 2019 Lessee Co., leased equipment from Lessor Co. The equipment had a useful...

On January 1, 2019 Lessee Co., leased equipment from Lessor Co. The equipment had a useful life of 6 years, a fair market value of $50,000, and a cost to Lessor Co. of $35,000. Lessor used an implicit interest rate of 7%. The lease is for 6 years, and calls for payments of $8,497 on January 1 of each year beginning January 1, 2019. The residual value of the equipment on December 31, 2024 is estimated to be $10,000, and is guaranteed by Lessee Co.  

  1. Show that the lease is a financing lease for the lessee and is a sales type lease for the lessor

  1. Prepare journal entries for both companies on January 1, 2019, December 31, 2019, and December 31, 2024. Prepare the amortization schedule for the lease.

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ekkarill92 answered 7 months ago
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