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Lorax Corporation (lessor) leased an airplane to Dorax Company (lessee) on 1/1/20 on a six-year...

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Accounting

  1. Lorax Corporation (lessor) leased an airplane to Dorax Company (lessee) on 1/1/20 on a six-year noncancellable lease. Annual payments of $292,000 are to be made each January 1st. The airplane has an estimated fair value of $1,750,000 and cost Lorax $1,200,000. It has a useful life of eight years, and an estimated $200,000 residual value at the end of the lease, which Dorax has not guaranteed. Lorax uses a rate of 4% in setting the lease payments. Prepare Lorax's lease amortization table and the journal entries that Lorax will make in 2020.

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