Terms of a lease agreement and related facts were:
The lease asset had a retail cash selling price of $114,000. Itsuseful life was six years with no residual value (straight-linedepreciation). Annual lease payments at the beginning of each yearwere $23,346, beginning January 1. Lessor’s implicit rate whencalculating annual rental payments was 9%. Costs of $2,562 forlegal fees for the lease execution were the responsibility of thelessor. Required: Prepare the appropriate entries for the lessor torecord the lease, the initial payment at its beginning, and at theDecember 31 fiscal year-end under each of the following threeindependent assumptions: 1. The lease term is three years and thelessor paid $114,000 to acquire the asset (operating lease). 2. Thelease term is six years and the lessor paid $114,000 to acquire theasset. Also assume that adjusting the lease receivable (netinvestment) by initial direct costs reduces the effective rate ofinterest to 8%. 3. The lease term is six years and the lessor paid$90,000 to acquire the asset.
