Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2018. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2018; remaining payments at June 30 and December 31 each year through June 30, 2022. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2018: $20 million. Prepare the journal entries for both Technoid. inc and Lone Star company on Jan 1st, 2018, at the beginning of the lease.

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.