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sultan company leased machinery from Fatima Inc. on Jan 1, 2021. The lease was recorded as a finance lease and cost 60,000. Annual rentals Of 17,208 are to be paid each year end (December). The lease is for 4 years and it has no residual value. Sultan borrowing rate is 10%. The economic life is 4 years. The first payment is Jan 1 2021. The second and subsequent payments are on 31 December (year end). a. Is this a finance lease? Explain why b. Record the journal entry for the lessee for the initial or beginning of lease using pv of 3.48685

sultan company leased machinery from Fatima Inc. on Jan 1, 2021. The lease was recorded as a finance lease and cost 60,000. Annual rentals Of 17,208 are to be paid each year end (December). The lease is for 4 years and it has no residual value. Sultan borrowing rate is 10%. The economic life is 4 years. The first payment is Jan 1 2021. The second and subsequent payments are on 31 December (year end). a. Is this a finance lease? Explain why b. Record the journal entry for the lessee for the initial or beginning of lease using pv of 3.48685

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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sultan company leased machinery from Fatima Inc. on Jan 1, 2021. The lease was recorded as a finance lease and cost 60,000. Annual rentals Of 17,208 are to be paid each year end (December). The lease is for 4 years and it has no residual value. Sultan borrowing rate is 10%. The economic life is 4 years. The first payment is Jan 1 2021. The second and subsequent payments are on 31 December (year end). a. Is this a finance lease? Explain why b. Record the journal entry for the lessee for the initial or beginning of lease using pv of 3.48685
Transcribed Image Text:sultan company leased machinery from Fatima Inc. on Jan 1, 2021. The lease was recorded as a finance lease and cost 60,000. Annual rentals Of 17,208 are to be paid each year end (December). The lease is for 4 years and it has no residual value. Sultan borrowing rate is 10%. The economic life is 4 years. The first payment is Jan 1 2021. The second and subsequent payments are on 31 December (year end). a. Is this a finance lease? Explain why b. Record the journal entry for the lessee for the initial or beginning of lease using pv of 3.48685
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