Chapter 15, Problem 15.34E

Lessor’s initial direct costs; operating lease

• LO15–4, LO15–7

The following relate to an operating lease agreement:

1. a. The lease term is 3 years, beginning January 1, 2018.
2. b. The leased asset cost the lessor $800,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets.
3. c. Annual lease payments at the beginning of each year were $137,000.
4. d. Incremental costs of negotiating and consummating the completed lease transaction incurred by the lessor were $2,400.

Required:

Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease team.