Please write steps. thank you
Flounder Corporation leased equipment to Shamrock, Inc. onJanuary 1, 2020. The lease agreement called for annual rentalpayments of $1,276 at the beginning of each year of the 3-yearlease. The equipment has an economic useful life of 7 years, a fairvalue of $7,600, a book value of $5,600, and Flounder expects aresidual value of $5,100 at the end of the lease term. Flounder setthe lease payments with the intent of earning a 8% return, thoughShamrock is unaware of the rate implicit in the lease and has anincremental borrowing rate of 10%. There is no bargain purchaseoption, ownership of the lease does not transfer at the end of thelease term, and the asset is not of a specialized nature.
What is the amount of the rental payments used in the leaseagreement?
Prepare the entries for Flounder for 2020.
How would Flounder’s accounting in part a change if it incurredlegal fees of $900 to execute the lease documents and $600 inadvertising expenses for the year in connection with the lease?
